TIDMRWS
RNS Number : 7802J
RWS Holdings PLC
15 December 2022
RWS Holdings plc
Results for the year ended 30 September 2022
The Group has delivered robust cash, generative, profitable
growth in line with market expectations; on track to deliver on our
growth strategy, with FY23 outlook in line with market
expectations
RWS Holdings plc ("RWS", "the Group"), a unique, world-leading
provider of technology-enabled language, content and intellectual
property services, announces its final results for the year ended
30 September 2022.
Financial overview
2022 2021 Change
Revenue GBP749.2m GBP694.5m +8%
G ross margin 46.7% 45.1% 160bps
Profit before tax GBP83.2m GBP55.0m +51%
Adjusted profit before tax
(1) GBP135.7m GBP116.4m +17%
Basic earnings per share 16.1p 10.9p +48%
Adjusted basic earnings
per share (1) 26.6p 23.8p +12%
Dividend:
Proposed final 9.50p 8.50p +12%
Total for year 11.75p 10.50p +12%
Cash conversion(2) 110.2% 96.7% 1,350bps
Net cash(3) GBP71.9m GBP45.3m +GBP26.6m
Group highlights
-- Robust performance with good progress on our medium-term accelerated growth plan:
-- Executing on our organic growth levers with
faster-than-anticipated transition towards SaaS revenues, and
strong growth in eLearning and Linguistic Validation revenues;
-- Encouraging progress in Language & Content Technology following re-organisation to give clear accountability and ownership, including over R&D;
-- Language eXperience Delivery ("LXD"), our unique Group-wide
production platform, is successfully partnering with our divisions
to process an increasing proportion of translation volumes,
supporting gross margin improvement;
-- Encouraged by the early impact of our transformation and pricing programmes; and
-- Integration of Fonto, the structured content management
business acquired in March, on track and performing well.
-- 8% year-on-year increase in revenues reflects an additional
month's trading from SDL plc ("SDL"), growth in Language Services,
accelerated growth in Language and Content Technology, and
favourable FX movements.
-- Excluding the impact of SDL, revenue growth was 3%
year-on-year; adjusting for foreign exchange movements and the
Fonto acquisition, in constant currency terms, organic revenue fell
1%. Accelerated growth in Language and Content Technology and
robust performance in Language Services was offset by softness in
Regulated Industries and IP Services.
-- We won new client logos in all divisions across multiple end
markets, including aerospace, automotive, education, energy
storage, financial services, IT consulting, manufacturing, medical
device, natural gas, pharmaceutical, software and
telecommunications.
-- 17% increase in adjusted profit before tax reflects full year
effect of synergies from the integration of SDL, operational
leverage from higher translation volumes through the LXD platform
and effective cost control.
-- Significantly improved cash generation, with 110.2% cash
conversion resulting in a GBP26.6m increase in year-end net cash(3)
to GBP71.9m after payment of the GBP14.7m initial consideration for
Fonto.
-- Amended and extended our revolving credit facility from $120
million to $220 million, on similar terms to the Group's previous
facility, with a maturity date of August 2026 and the option to
extend the facility via an uncommitted $100 million accordion and
for a further year.
-- Recommended final dividend of 9.5p per share; a 12% increase
in the total dividend for the year of 11.75p.
-- Further strengthened the Board with the appointments of Julie
Southern as Non-Executive Director and Candy Davies as Chief
Financial Officer. Jane Hyde was also appointed as General Counsel
and Company Secretary and joined the Executive Team.
-- Encouraging progress on our Environment, Social and
Governance agenda during the year, including the rapid expansion of
our RWS Campus programme which now covers more than 700
universities across 76 countries and the award of a silver medal by
EcoVadis (a leading business sustainability ratings provider).
Language Services
-- Revenues of GBP342.1m were 10% higher year-on-year on a
reported basis (FY21: GBP309.7m) and saw a 1% increase on an
organic constant currency basis.
-- Solid growth in Strategic Solutions Group; some Enterprise
Internationalisation Group clients reduced activity, however
satisfaction is high and retention is strong, so we are well-placed
for recovery.
-- Adjusted operating profit increased by 21% to GBP53.3m (FY21: GBP44.1m).
Regulated Industries
-- Revenues of GBP173.0m increased by 6% year-on-year on a
reported basis (FY21: GBP163.1m) and decreased by 2% on an organic
constant currency basis.
-- Strong performance in Linguistic Validation offset by some
second half softness as we saw reduced volumes from one client who
has started offering competing services and as a result of exiting
some loss-making business.
-- Adjusted operating profit increased by 11% to GBP31.6m (FY21: GBP28.4m).
Language & Content Technology
-- Revenues of GBP126.9m were 17% higher year-on-year on a
reported basis (FY21: GBP108.1m) and saw a 5% increase on an
organic constant currency basis.
-- Product group accountability drove accelerated growth,
despite faster-than-anticipated transition towards SaaS revenues,
with 26% of new revenues for the year being SaaS (FY21: 18%). 29%
of revenues for the division are now attributable to SaaS (FY21:
24%).
-- Adjusted operating profit increased by 45% to GBP37.6m (FY21: GBP25.9m).
IP Services
-- Revenues of GBP107.2m were 6% lower year-on-year on a
reported basis (FY21: GBP113.6m) and 10% lower on an organic
constant currency basis, in line with our expectations and previous
guidance.
-- Lower revenue in FY22 driven by impact of the forthcoming
introduction of the Unitary Patent on our Eurofile services,
however solid growth in Worldfile and other patent services,
together with sales improvement initiatives, are expected to
underpin FY23 recovery.
-- Adjusted operating profit fell by 7% to GBP30.1m (FY21: GBP32.3m).
Current trading and outlook
-- The Group's outlook is in line with market expectations(6) .
-- The current economic environment remains challenging whilst
also offering opportunities to strengthen leadership in our
markets.
-- Our unique capabilities, diverse end-market exposure and
strong client retention continue to enable resilience.
-- Capex and investments are expected to be in line with
guidance, with strong cash generation and a strong balance sheet
positioning us well to make the investments announced in March,
fund further selective acquisitions to enhance the Group's
capabilities and geographic reach and to maintain a progressive
dividend policy.
Ian El-Mokadem, Chief Executive Officer of RWS, commented:
"Against a backdrop of wider global economic uncertainty, RWS
has delivered robust, cash generative, profitable growth in line
with market expectations, continued its unbroken record of dividend
growth and made good progress on the actions and investments that
we set out at our Capital Markets Day in March.
"The successful integration of SDL and the delivery of synergies
ahead of original expectations has driven a strong margin
improvement and provided the Group with a unique combination of
technology and expertise from which to further develop its
technology-enabled platform."
"We are also very encouraged by the early signs of delivery
against our organic growth initiatives, particularly eLearning and
Linguistic Validation, our pricing programme and our transformation
projects. The simpler, more efficient and accountable
organisational model we have put in place to deliver our strategy
is already making a difference.
"We believe that the current environment presents an opportunity
for us to strengthen our leadership in our markets, as a
well-funded business of unique scale, sector diversification,
footprint and capabilities. In parallel, the Group's strong cash
generation and balance sheet means that we retain the ability and
appetite to make strategically compelling acquisitions.
"Whilst remaining mindful of the global economic backdrop, as we
enter FY23 we remain on track to deliver on our growth strategy and
are confident in the long-term opportunities provided by a range of
growth drivers across our markets."
For further information, please contact:
RWS Holdings plc
Andrew Brode, Chairman
Ian El-Mokadem, Chief Executive Officer
Candy Davies, Chief Financial Officer
Rod Day, Interim Deputy Chief Financial Officer 01753 480200
MHP (Financial PR Advisor) rws@mhpgroup.com
Katie Hunt / Simon Hockridge 020 3128 8100
07884 494 112
Numis (Nomad & Joint Broker)
Stuart Skinner / Kevin Cruickshank / Will
Baunton 020 7260 1000
Berenberg (Joint Broker)
Ben Wright / Toby Flaux / Alix Mecklenburg-Solodkoff 020 3207 7800
1 RWS uses adjusted results as key performance indicators as the
directors believe these provide a more consistent measure of
operating performance by adjusting for acquisition-related charges
and significant one-off or non-cash items. Adjusted profit before
tax is stated before exceptional items, share-based payment
expenses and amortisation of acquired intangibles. Adjusted
earnings per share adjusts for the same items, net of any
associated tax effects.
2. Cash conversion is defined as adjusted operating cash flows
divided by adjusted operating profit.
3. Net cash comprises cash and cash equivalents less loans but
before deducting lease liabilities.
4. Organic constant currency excludes the impact of acquisitions and assumes constant currency.
5. Adjusted operating profit is stated before amortisation of
acquired intangibles, acquired costs, share-based payments expense
and exceptional items.
6. The latest Group-compiled view of analysts' expectations for
FY 2023 gives a range of GBP773.5m-GBP795.9m for revenue, with a
consensus of GBP781.8m; a range of GBP126.4m-GBP140.7m for adjusted
profit before tax, with a consensus of GBP134.3m, and a range of
24.4p to 27.9p for adjusted EPS, with a consensus of 26.3p.
About RWS
RWS Holdings plc is a unique, world-leading provider of
technology-enabled language, content and intellectual property
services. Through content transformation and multilingual data
analysis, our unique combination of technology and cultural
expertise helps our clients to grow by ensuring they are understood
anywhere, in any language.
Our purpose is unlocking global understanding. By combining
cultural understanding, client understanding and technical
understanding, our services and technology assist our clients to
acquire and retain customers, deliver engaging user experiences,
maintain compliance and gain actionable insights into their data
and content.
We work with over 80% of the world's top 100 brands, more than
three-quarters of Fortune's 20 'Most Admired Companies' and almost
all of the top pharmaceutical companies, investment banks, law
firms and patent filers . Our client base spans Europe, Asia
Pacific and North and South America. Our 65+ global locations
across five continents service clients in the automotive, chemical,
financial, legal, medical, pharmaceutical, technology and
telecommunications sectors.
Founded in 1958, RWS is headquartered in the UK and publicly
listed on AIM, the London Stock Exchange regulated market
(RWS.L).
For further information, please visit: www.rws.com .
CHAIRMAN'S STATEMENT
INTRODUCTION
RWS continued to evolve rapidly during FY22, with the
formulation and launch of its medium-term growth strategy, the
introduction of new values and purpose, further development of its
Board and Executive Team, and completion of the SDL integration.
The Group is now a unique world-leading provider of
technology-enabled language, content and intellectual property
services, which operates in attractive growing markets with a
combined global size estimated at more than GBP47bn 1 . The Group's
specialist knowledge, reputation and scale help it to enjoy leading
positions in a range of highly fragmented markets, serving a highly
diversified client base.
PERFORMANCE
The Group delivered GBP749.2m of revenues for the year,
approximately 8% ahead of the prior year (FY21: GBP694.5m). This
reflects an additional month's trading from SDL plc ("SDL"),
accelerated growth in Language and Content Technology, modest
growth in Language Services, and favourable FX movements. These
were offset by a reduced volume of activity from some of our
largest global technology clients, a decision to gradually cease
work with a significant client in Regulated Industries and, in IP
Services, some weaker demand arising from the impact of the
forthcoming Unitary Patent. Overall, the Group demonstrated strong
resilience against a worsening global economic backdrop -
illustrating the defensive qualities of a well-diversified
business, operating across a number of key territories.
Profit before tax for the year increased to GBP83.2m (FY21:
GBP55.0m). Adjusted profit before tax increased to GBP135.7m (FY21:
GBP116.4m), reflecting effective cost control, the full year effect
of synergies from the integration of SDL, and operational leverage
from higher translation volumes through Language eXperience
Delivery, our production platform.
The Group continues to enjoy a strong balance sheet, with net
assets of GBP1,141.7m (FY21: GBP1,010.9m) as at 30 September 2022.
This included net cash of GBP71.9m (FY21: GBP45.3m), underlining
the Group's continuing cash generation characteristics.
PEOPLE AND BOARD
At 30 September 2022 RWS employed 7,761 full-time equivalent
colleagues across 72 locations in 33 countries (FY21: 7,796). As
the world emerged from the constraints of the global pandemic, we
undertook a gradual return to office working and we introduced an
agile working policy that supports a mix of office and home working
for all our colleagues. We recognise the value of regular
face-to-face contact in fostering high-performing teams and
effective collaboration, as well as the benefits of technology in
delivering time and energy savings from a reduction in commuting.
In planning the return to our offices, we also took the opportunity
to consider the viability of some of our locations and were able to
reduce the number of offices by approximately 13%, with associated
savings in property and related costs.
As in FY21, our teams responded admirably to the challenges
caused by the lockdowns and travel restrictions in various
jurisdictions during the first half of the year, continuing to
focus on delivering high-quality services and products to our
clients, who often faced similar restrictions on their operations.
In February we responded rapidly to the situation in Ukraine and we
continue to provide support for those colleagues impacted by the
conflict. On behalf of the Board, I would like to thank all our
teams across the world for their continuing commitment, focus and
efforts to support our clients and further develop the Group.
On 29 December 2021 we announced that Des Glass, Chief Financial
Officer and Company Secretary, was leaving to pursue other
opportunities. On 10 January 2022 we confirmed that Rod Day had
joined the Group as Interim Deputy Chief Financial Officer. Rod has
more than thirty years of senior finance and strategy experience,
primarily in the business services, online and retail sectors.
After an effective handover period, Des Glass left on 8 April 2022,
at which point Rod Day was appointed to the Board. In parallel
Christopher Lewey, Group Corporate Development Director and a
member of the Executive Team, was appointed acting Company
Secretary.
After a rigorous search and selection process, we announced the
appointment of Candida (Candy) Davies as Chief Financial Officer on
5 July 2022. Candy was most recently Head of Finance for the
Personal Health division of Royal Philips, the Dutch-headquartered
health technology conglomerate, where she also supported the Group
Innovation and Strategy function. Candy joined the Group on 3
October 2022 and was appointed to the Board the same day. She also
joined the Executive Team and has been conducting a thorough
handover with Rod Day, who will leave the Group on 31 December
2022. Jane Hyde was also appointed as General Counsel and Company
Secretary and joined the Executive Team on 3 October 2022. As a
result of this appointment, Christopher Lewey stepped down from his
role as acting Company Secretary.
On 27 July 2022 we also announced the appointment of Julie
Southern as Non-Executive Director. The appointment further
strengthens the Group's highly experienced Board and forms part of
the Group's succession planning, with the intention that Julie
takes up the role of Non-Executive Chairman in October 2023, at
which time I will become a Non-Executive Director. Julie, who has
also become a member of the Group's Audit Committee, brings a
wealth of business and governance experience from her executive
career and her current Non-Executive Director roles at Rentokil
Initial, Ocado, NXP Semiconductors and easyJet, and we are
delighted to have attracted someone of her calibre to chair the
Group.
On behalf of the Board, I would like to thank Des and Rod for
their significant contributions to the development of the
Group.
SUSTAINABILITY AND ESG
RWS remains fully committed to sustainability and achieving the
highest standards in Environmental, Social and Governance ("ESG")
in its business activities and interactions with stakeholders.
Sustainability was therefore a core consideration in the
development of the Group's medium-term growth strategy and
purpose.
As a signal of our ambition we will be publishing a separate ESG
report for the first time in January 2023. This comprehensive
review sets out our progress in detail and will be available to
download from the Group's website
(www.rws.com/about/corporate-sustainability/).
DIVID
RWS continues to deliver against its progressive dividend policy
and this marks the 19th year in succession that we have increased
the dividend. The Group remains highly cash generative and, while
our previously announced investment programme will mean a higher
level of capital expenditure for the next couple of years, we will
continue to deliver high levels of cash conversion and we have a
strong net cash position.
The Board therefore recommends a final dividend of 9.5p per
share. Together with the interim dividend of 2.25p per share, this
will result in a total dividend of 11.75p for the year - an
increase of 12% compared with FY21. Subject to final approval at
the AGM, the final dividend will be paid on 24 February 2023 to
shareholders on the register at 27 January 2023.
Summary
The Group has delivered another robust set of results against a
backdrop of increasing economic uncertainty and conflict in Eastern
Europe. The global nature of our business and the diverse range of
end markets that we operate in allows us to better navigate these
impacts while delivering consistently strong returns to
shareholders.
With an even stronger Board and Executive Team in place, I
remain confident in the Group's position and long-term prospects.
We continue to lead the markets which we serve and we are excited
about the opportunities for organic growth and M&A in the
sector, which will support enhanced profitability and cash
conversion in the medium- to long-term. I am looking forward to my
last year as Chairman as the Group continues to deliver on its
five-year accelerated growth plan.
Andrew Brode
CHAIRMAN
14 December 2022
CHIEF EXECUTIVE OFFICER'S REVIEW
I am delighted to report another solid year of progress in the
development of RWS as a unique world-leading provider of
technology-enabled language, content and intellectual property
services.
With the impact of the pandemic fundamentally behind us, we have
been focused on developing, launching and starting to implement the
Group's medium-term strategy and accelerated growth plan.
It has been an exciting and busy year for the business as we
have also defined our purpose and values; embarked on a significant
transformation programme; strengthened our Executive Team;
completed our second colleague engagement survey; and made further
progress on our ESG journey - all while continuing to grow our
client base.
As always, serving our clients comes first and I take great
pride in knowing that our global teams have continued to deliver
day-in-day-out for the many thousands of organisations who rely on
our unique blend of service and technology solutions.
MEDIUM-TERM STRATEGY AND ACCELERATED GROWTH PLAN
In the first half of the year we conducted a comprehensive
review of our strategy. With the integration of SDL completed, it
was an opportunity to develop a refreshed plan for the next phase
of development for the Group. Consulting widely, using independent
expertise and detailed growth forecasts, we created a focused,
ambitious and grounded five-year accelerated growth plan, a fresh
set of values, and a new purpose for the Group - unlocking global
understanding.
The strategy is centred on organic growth - to drive cash
generative enhanced profitability. It will be enabled by a series
of transformation investments that will deliver an efficient and
sustainable platform business and will have the sector's strongest
production engine, which we have named Language eXperience Delivery
("LXD"), at its heart. We have identified a range of growth
initiatives, in both existing markets and in adjacencies, that will
allow us to capitalise on our strengths and deliver value to our
clients, as well as pivoting towards a greater proportion of our
revenues being derived from higher growth segments. The opportunity
for RWS is significant, operating in markets with an estimated
combined size of GBP47bn 1 , and we have scope to take advantage of
M&A opportunities due to the often fragmented nature of these
markets.
Conscious of the evolving nature of client needs in the end
markets that we serve, and with an exciting suite of language and
content technology products, we believe that we have the right
blend of human expertise and software solutions to successfully
meet any client requirement. Our solutions range from localising
content for life-saving applications and global eLearning
platforms, to data labelling and text analytics that offer clients
valuable insight in a single language. Through content
transformation and multilingual data analysis, we help our clients
to grow by ensuring they are understood anywhere, in any language.
We continue to partner with many of the world's leaders in their
respective markets.
We regard technological change as an enabler for our sector and
for our business. Technology expands the range of content that can
be localised and brings added sophistication to the solutions that
we provide - regardless of content type, quality and urgency. With
the continued explosion in the volume of content being created and
requiring localisation, we are confident that technology is an
opportunity for RWS.
The extent of our human expertise is centred on more than 2,000
in-house linguists and access to a network of in excess of 30,000
freelance translators. They are complemented by some of the
sector's foremost experts in neural machine translation,
translation productivity and management, and structured content
management, who are focused on the continuous development of our
software products. These experts work with our highly integrated
delivery teams and dedicated account teams for our large and
enterprise clients. Together, they bring a deep level of
understanding - client, cultural and technical - which, in
combination, differentiates us in the market.
Our pURPOSE
Understanding is at the core of what we deliver for clients and
informs our purpose - unlocking global understanding. Across our
four core use cases (acquiring and retaining customers; delivering
user experiences; maintaining compliance; and access to insights),
we work towards a common outcome - breaking down barriers to
communication and understanding so that our clients can connect
with their audiences, solve problems, and grow their businesses
anywhere in the world. Our global scale and reach allow us to
support those clients whose ambition is to go global. It also means
that we can fully support any client on a genuine 24/7 basis, with
experts available across multiple time zones. We are not only
helping clients succeed, we are helping the world to connect.
Our values
In parallel with defining our medium-term strategy, we have
spent time defining how we think, act and behave as an organisation
and developed a new set of values, grounded in the business we are
today, and the one that we will become. We consulted widely with
colleagues, through an initial set of workshops, core working group
input, and then an all-company survey where everyone was given the
opportunity to give us their views. I am delighted that 56% of
colleagues did so.
Our new values - we partner; we pioneer; we progress; and we
deliver - give everyone at RWS clear guidance as to the behaviours
that will underpin our success. They will also help align
colleagues in our journey towards a more unified company
culture.
ORGANISATION AND CULTURE
We made a number of organisational changes to support delivery
of our strategy. We reaffirmed RWS's long-held view on the primacy
of the operating divisions and business units within them, giving
clear accountability to the general managers of our technology
product portfolios and putting each R&D team under the general
manager's leadership. We have already seen a positive effect in the
Language and Content Technology division, with a strong return to
growth during the year.
We enhanced sales leadership in several areas and have begun to
inculcate a stronger growth mindset across the business, backed by
more readily available and comparable data on sales and marketing
performance, which is reviewed during our internal quarterly
business review process. We have also moved the product support
function closer to the client and have taken some important steps
in relation to our 'voice of the customer' programme, where we
harmonised historically disparate schemes, partnered with one of
the world's leading Net Promoter Score (NPS) experts, and
centralised the programme and expanded its scale - developing a
product-specific survey to go alongside the existing client-focused
one.
We announced our accelerated growth plan, values and purpose to
investors on 23 March 2022, and to our colleagues and clients in
the ensuing two months via a series of events, engagements and
targeted communications. We were encouraged by the positive
response from all our stakeholders and we continue to reinforce our
new Group story, both inside and outside the organisation.
Internally, we are now embedding the purpose and values in
everything that we do, so that they become part of our
organisational DNA - from talent attraction and performance
management to colleague development and recognition.
OPERATING REVIEW
Language Services
Solid growth in Strategic Solutions Group; some Enterprise
Internationalisation Group clients reduced activity, but confidence
in these established, long-term relationships points to recov
ery
The Language Services division represented 46% of Group revenues
in the year (FY21: 46%). Revenues of GBP342.1m were 10% higher year
on year on a reported basis (FY21: GBP309.7m) and saw a 1% increase
on an organic constant currency basis.
In the Strategic Solutions Group there were a number of new
client wins in the Major Account and GoGlobal segments across a
variety of verticals. The particular success that we had in the
first half with new business won in the Americas region continued
through the second half. In our GoGlobal proposition, where we use
our expertise, technology and reach to support high-growth
businesses that are expanding rapidly into new territories, we
welcomed several electric vehicle manufacturers to our client base,
demonstrating our ability to serve new entrants alongside many of
the more established global manufacturers. The GoGlobal solution
was successfully introduced into the Japanese and South Korean
markets, with some initial client wins and a healthy pipeline.
One of our key growth initiatives is eLearning, where we had a
strong year. We won several new clients based on our new
proposition and expanded into India and Japan. Cross-selling
eLearning into existing accounts accelerated in the second half of
the year and we had our first major wins in providing a full
end-to-end eLearning content lifecycle solution, which included
development and concurrent authoring.
In our Enterprise Internationalisation Group, which serves
global technology enterprises, we had some successful programme
wins with one large technology company and strong revenue
development with a global digital retailer in the first half. We
saw a reduced volume of activity from several of the largest
technology clients but we remain confident in the strong, long-term
nature of these relationships. These clients continue to be very
satisfied with the services and solutions we are providing, so we
expect to see volumes recover in due course.
We identified data services, including data annotation and
labelling, as an important growth lever and we have made progress
on the investments required to strengthen our existing
offering.
The division's adjusted operating profit 2 was GBP53.3m (FY21:
GBP44.1m), on a reported basis, reflecting the growth in top-line
revenues in the Strategic Solutions Group, improved gross margin
and effective cost control.
Regulated Industries
Strong performance in Linguistic Validation offset by some
second half softness
The Regulated Industries division accounted for 23% of Group
revenues in the year (FY21: 23%). Revenues of GBP173.0m increased
by 6% year on year on a reported basis (FY21: GBP163.1m) and
decreased by 2% on an organic constant currency basis.
In the Life Sciences vertical, our Linguistic Validation ("LV")
proposition again performed strongly with a number of additional
programmes with existing clients, as well as some significant new
orders in Q4 - with multiple study programmes covering LV, eCOA
migration and proofreading, and consulting services.
In August we joined Critical Path Institute's Electronic
Clinical Outcome Assessment (eCOA) Consortium to help drive the
science, best practice and adoption of eCOA within clinical trials.
An eCOA replaces the traditional paper-based approach to collecting
patient results, feedback, and results in clinical trials and
studies. RWS has delivered LV for more than 20,000 clinical outcome
assessments, into 429 language pairs, in over 200 different
specific therapeutic and disease areas. As a result, we are pleased
to be one of 19 member organisations who collaborate across
multiple disciplines for the electronic collection of clinical
outcome data. The Group also started an important collaboration
with a US-based clinical trial platform provider during the
year.
We saw solid performance with our largest life sciences client,
with continued growth in clinical and regulatory work reflecting
increased account management focus. Across our top 20 clients, we
saw good period-on-period growth with 13 of them (on a constant
currency basis), including significant new programmes with an
existing medical device client and an existing pharmaceutical
client. We also secured a major new client in the managed care
segment - once again reflecting our continued leadership in annual
enrolment in the US - and we won our first piece of Contract
Research Organisation ("CRO") business in Japan.
As previously announced, in the second half of the year we
decided to gradually reduce work with a large CRO which lowered its
volumes and moved into offering competing services.
In the financial and legal services vertical we saw solid
revenues, with several new client wins with financial services
organisations in the last quarter. In the first half we exited
several low-margin contracts which impacted revenues, but improved
profit performance. Our ESG and risk and compliance offerings have
shown encouraging signs of progress.
The division's adjusted operating profit 2 increased 12% to
GBP31.6m (FY21: GBP28.4m), on a reported basis. This was driven by
increasing use of LXD, the exit from low-margin contracts and
effective cost control.
Language and Content Technology
Full ownership and accountability for product groups drove
accelerated growth, despite faster-than-anticipated transition
towards SaaS reven ues
The Language and Content Technology ("L&CT") division
accounted for 17% of Group revenues in the year (FY21: 15%).
Revenues of GBP126.9m were 17% higher year on year on a reported
basis (FY21: GBP108.1m) and saw a 5% increase on an organic
constant currency basis, despite the higher than anticipated
increase in the proportion of SaaS revenues, which holds back
revenue during the transition phase from perpetual to SaaS
licences.
After an encouraging first half we moved to full ownership and
accountability for the leaders of the four principal product areas
- Language Weaver, Trados, Tridion and Contenta - which drove a
more focused and successful approach in the second half. The
division's accelerated growth plan resulted in a refined
go-to-market model for each product, aided by the stronger link
between product development and sales and marketing. Leveraging the
wider RWS client portfolio, we have seen an increasing number of
sales of language and content technology solutions to services
clients across the Group.
Renewals and extensions were strong and we secured a major new
Tridion client - a provider of robotic automation software. A major
new release of our Trados Studio product (a key productivity tool
for individual translators), incorporating hundreds of new
features, drove a positive outcome in the second half and
demonstrated our commitment to innovation across our technology
platform.
SaaS revenue growth for the year was 26% (FY21: 18%), ahead of
our plan and reflecting the success of a more targeted sales
approach. The proportion of SaaS revenues for the division is now
29% (FY21: 24%), offering increased recurring revenue and improved
visibility.
In March 2022 we announced the acquisition of Fonto, a
structured content management business with a strong roster of
clients, complementing our Tridion proposition and widening our
proposition in this segment. Integration of Fonto into the Group is
on track.
The division's adjusted operating profit 2 was GBP37.6m (FY21:
GBP25.9m), on a reported basis, reflecting the growth in top-line
revenues, supported by lower cloud costs and some direct people
cost savings, and despite the greater proportion of SaaS revenues
in the year.
IP Services
Lower revenue due to impact of forthcoming introduction of
Unitary Patent, partially offset by solid growth in Worldfile and
other patent services
The IP Services division represented 14% of Group revenues in
the year (FY21: 16%). Revenues of GBP107.2m were 6% lower year on
year on a reported basis (FY21: GBP113.6m) and 10% lower on an
organic constant currency basis.
In line with guidance, the division continued to experience weak
demand as a result of the impending introduction of the Unitary
Patent (UP). As we noted in our HY22 results, the European Patent
Office (EPO) announced in January that it would allow clients to
delay the granting of patent applications in order to benefit from
protection under the UP. The latest guidance from the EPO indicates
that the UP will become effective in the first half of 2023. We
continue to engage with clients and other stakeholders to
understand their proposed approach to the UP and its likely impact
on the division.
Other segments, which account for approximately two-thirds of
the division's revenues, delivered modest growth, including patent
translation and filing outside Europe, IP Research and our
operations in Japan. The integration of Horn & Uchida Patent
Translation Ltd was successfully completed and will support
continued growth in East Asia. Revenues in China had another very
strong year, growing by 47%.
In line with lower revenues in our European patent translation
and filing business, we took actions in the first half to lower our
cost base. The division's transformation programme remains key to
its longer-term prospects and we saw good progress during the year
on the design of the future state operating model. The
transformation will enhance many aspects of our proposition and is
expected to deliver significant operating efficiencies.
We also restructured the division's leadership team. In the
first half, we strengthened its sales capability and focus to help
drive penetration in renewals and better access to the patent
attorney segment, with encouraging results. We subsequently secured
new logos with clients from a diverse range of verticals, including
chemical manufacturing and agricultural sciences; energy storage
and battery manufacturing; pharmaceutical and medical device;
petroleum and natural gas; and the world's largest producer of home
appliances.
In November 2022 we announced the appointment of Daniel Bennett
as President, IP Services. Daniel, who is a proven industry leader
with more than 25 years' international experience in brand
protection, covering a breadth of IP and corporate security issues,
will drive the next phase of the division's development, including
delivery of the transformation programme.
The division's adjusted operating profit 2 was GBP30.1m (FY21:
GBP32.3m) on a reported basis, reflecting the reduction in top-line
revenues, offset by good cost control and the positive impact of
the actions taken in the first half, which protected
profitability.
OUR PEOPLE
RWS is a truly people-centred organisation. Deep client
understanding, specialist sector expertise across multiple
verticals, and a rich understanding of culture and nuance enable
more than 7,700 colleagues to put the best solutions in front of
clients across the world every day, aided by some of the sector's
smartest technologies.
Through our 'voice of the customer' programme and the high
levels of client retention that we enjoy, we can see the positive
impact that our people bring to our clients' success and the level
of trust that we engender. Once again, I would like to thank all of
our incredibly talented teams around the world for their hard work
and dedication which enables us to deliver best-in-class solutions
24/7.
During the year we continued to focus our efforts on RWS being a
great place to work. As well as defining and launching a new
purpose and fresh values (with 56% of colleagues taking the
opportunity to have a say in their development via a survey), we
launched MyLX, a Group-wide learning portal, demonstrating our
commitment to building a culture of continuous learning. With
hundreds of courses available across multiple languages, take-up
has been very encouraging and we continue to add our own bespoke
training to the platform, where required, as well as best-in-class
external learning assets provided by the platform provider
Skillsoft.
In September 2022 we conducted our second colleague engagement
survey, with 85% of colleagues participating (FY21: 81%). We
evolved our approach, moving to an Employee Promoter Score
framework, which gave us an overall employee engagement score for
the first time, as well as making the survey available in 12
languages. The overall engagement score was 69%, with some clearly
articulated strengths, as well as a number of opportunities for us
to address. Partnering with our 'voice of the customer' programme
provider also gave us access to valuable benchmarking data,
allowing us to understand the steps we need to take to match the
global benchmark for businesses of our type.
The nature of labour markets has clearly changed over the course
of the last 12 months and the importance of having a compelling
employee proposition to attract the right talent is more pertinent
than ever, particularly against a backdrop of increasing wage
inflation. We believe that the progress made on our people agenda
during FY22 moved us closer to being the employer of choice in our
sector and I am encouraged by our voluntary colleague attrition
rate(3) of 15.9% for the year (FY21: 19.2%).
We remain shocked and saddened by the situation in Ukraine and
we continue to focus on supporting our colleagues in Kyiv and the
wider humanitarian efforts. In February we immediately implemented
our crisis response plan and continue to monitor the situation
closely.
In addition to the Board and Company Secretariat changes
outlined in the Chairman's Statement, we also took a number of
steps during the year to strengthen our Executive Team. At the
start of 2022 Jim McHugh joined as Chief People Officer, with a
remit to fully realise the benefits of scale across all aspects of
the colleague experience, alongside shaping a more unified culture,
to ensure we have committed, energised and engaged people at all
levels of the organisation.
In the spring Maria Schnell was promoted to the position of
Chief Language Officer, leading the development of the LXD - our
unique production platform - with responsibility for our 2,000+
strong team of in-house linguists. At the same time Emer Dolan was
promoted to the role of President, Enterprise Internationalisation
Group (part of our Language Services Division), which works closely
with our largest technology enterprise clients, building highly
integrated solutions that enable them to continually innovate,
anticipate trends and scale their global operations.
In September 2022 we appointed Terry Doyle as Chief Information
Officer, with responsibility for the Group's information technology
infrastructure, data, security and compliance, as well as ensuring
the delivery of the transformation programmes that we launched as
part of our medium-term strategy.
SUSTAINABILITY AND ESG
We have made encouraging progress on our sustainability agenda
during the year. As a participant in their Early Adopter Programme,
we submitted our 2022 Communication on Progress report to the UN
Global Compact in June 2022, and our Global Reporting Initiative
framework report was submitted in July 2022, following approval by
a third-party assessor.
On the environment we moved to a new web-based platform to
better facilitate measuring and tracking our carbon emissions and
have spent the year gathering the baseline data that will allow us
to submit science-based targets to SBTi for validation in FY23. We
also launched our Sustainable Procurement Policy and rolled out the
supporting action plan across the Group.
RWS Campus, our global university partnership programme, which
inspires and develops localisation talent worldwide, had an
extremely strong year. We merged the RWS Trados Academic Partner
Programme with RWS Campus, meaning that we now have more than 700
university partnerships globally across 76 countries. Following the
lifting of restrictions in the majority of geographies, we have
been able to return to onsite engagement with universities, and
hosted 90 workshops, talks and events during the year. We also
expanded the RWS Campus programme in Africa, with 12 universities
joining the programme for the first time, as we focused on eight
languages, including Amharic, Hausa, Swahili and Zulu. Trados
Studio is now provided free for teaching purposes to universities
(moving from a discounted approach previously). A third of interns
who spend time at RWS through the RWS Campus programme are offered
a full-time career after completing of their degrees.
We also relaunched the RWS Foundation during the year, with a
key aspect being its response to those impacted by the conflict in
Ukraine. The Foundation's Ukraine Appeal raised GBP34,436 from
colleague donations and donated an additional GBP15,000 to the
International Committee of the Red Cross. The Foundation also made
further donations of GBP10,000 each to the UNHCR, the UN's Refugee
Agency, and to UNICEF, the UN's Children's Fund.
On governance, we completed the harmonisation of policies across
the Group and shared these with colleagues in the first quarter of
the year. In the second half of the year, we launched a Group-wide
Code of Conduct, with associated training, giving all our people a
simple guide to what is expected of them at work, as well as easy
access to the resources that will help support effective action and
decision making. With our ambition to be the best-run business in
our sector, it is vital that our teams are given the framework and
the tools to act with integrity at all times.
Shortly after the end of the year, we were delighted to be
awarded a silver medal by EcoVadis, the world's most trusted
provider of business sustainability ratings. EcoVadis gives silver
medals only to the top quartile of companies participating in its
programme worldwide. RWS was also placed in the top 10% of
companies in the industry category 'Other professional, scientific
and technical activities'.
CURRENT TRADING AND OUTLOOK
Against a backdrop of wider global economic uncertainty, RWS has
delivered in line with market expectations. The Group is in a
robust position, with resilience afforded by its diversified
capabilities and end markets. We also remain confident in the
long-term opportunities provided by a range of growth drivers
across our markets.
We have continued to make progress on the actions and
investments that we set out at our Capital Markets Day and we are
very encouraged by the early signs of delivery against our organic
growth initiatives, particularly eLearning and Linguistic
Validation. We are also encouraged by the impact of our pricing
programme and the Group's focus on its transformation projects. The
simpler, more efficient and accountable organisational model we
have put in place to deliver our strategy is already making a
difference.
We also believe that the current environment presents an
opportunity for us to strengthen our leadership in our markets, as
a well-funded business of unique scale, sector diversification,
footprint and capabilities. In parallel, the Group's strong cash
generation means that we retain the ability and appetite to make
strategically-compelling acquisitions.
As we enter FY23, our outlook is in line with market
expectations and our capex and investments in line with plans
presented at our Capital Markets Day.
Ian El-Mokadem
CHIEF EXECUTIVE OFFICER
14 December 2022
CHIEF FINANCIAL OFFICER'S REVIEW
INTRODUCTION
The Group has made significant progress during 2022. The Group
successfully integrated the acquisition of SDL plc ("SDL") and laid
out an ambitious Accelerated Growth Strategy. During 2022 revenue
growth, coupled with improved margins, has supported strong cash
generation. A strong platform has been built for further progress
in 2023 and beyond.
During 2022 total revenue grew by 8%, operating profit by 50%,
and adjusted profit before tax by 17%. Results were supported by an
extra month of SDL in 2022 when compared to 2021, the successful
execution of the synergy and integration programme, as well as
favourable foreign exchange movements. Strong performance in the
Language and Content Technology division helped to offset the
regulatory impact of the introduction of the Unitary Patent in the
IP Services division. The Group has identified a number of key
growth levers, such as eLearning and Data Annotation, and is
investing behind these levers to drive future growth. We are also
investing to transform our back office efficiency to enable this
growth. We are encouraged by the early impact of our pricing
programme, which aims to mitigate the impact of cost inflation. The
Group continued to enhance its portfolio with the acquisition of
Liones Holding B.V, whose flagship product Fonto, is a leading
authoring solution for mission-critical documents.
The Group continues to be highly cash generative, resulting in
an increase in net cash (excluding lease liabilities) from GBP45.3m
as at 30 September 2021 to GBP71.9m as at 30 September 2022,
notwithstanding significant acquisition costs, and costs associated
with delivering synergies following the acquisition of SDL. Net
cash including lease liabilities is GBP25.2m - significantly
improved from an equivalent net debt measure of GBP6.2m as at 30
September 2021.
REVENUE
Overall in FY22 the Group generated revenues of GBP749.2m, which
is 8% higher than FY21. Revenue in FY22 benefited from an
additional month of trading from SDL, which was acquired in
November 2020. Excluding this impact, revenue growth was 3%. The
strengthening of the US Dollar when compared to prior year also
supported revenue in local sterling currency. On an organic
constant currency ("OCC") basis revenues are 1% lower than those
achieved in FY21.
In divisional terms, Language Services recorded GBP342.1m in
revenue, a 10% increase in total revenue and 1% on an OCC basis.
Reduced volume from certain of the largest technology clients was
more than offset by growth from the Strategic Solutions Group.
Regulated Industries recorded GBP173.0m, an increase of 6%,
although a decline of 2% on an OCC basis. Reducing work for a
significant client and also stopping work for a number of
unprofitable clients impacted revenue. Language and Content
Technology had total revenue of GBP126.9m, an increase of 17% year
on year and 5% OCC. Good growth was recorded across the portfolio,
despite the increase in SaaS revenues which in the short term
defers current year revenues to future years. IP Services recorded
GBP107.2m, a decrease of 6% on prior year and 10% on an OCC basis.
The proposed introduction of the Unitary Patent in the European
Union, which we forecast for H1 FY23, has impacted volumes in the
short term as clients look to defer filings.
The majority of the Group revenue, categorised by geography, is
in the US market, which accounts for 52% of the total. Client
concentration is such that no one client accounts for more than 10%
of Group turnover.
GROSS PROFIT
Gross profit increased by 12% to GBP350.2m, delivering a gross
margin of 46.7%. This represents an increase from 45.1% in the
prior year, primarily as a result of the change in revenue mix
towards the higher gross margin division of Language and Content
Technology, increased use of the Language eXperience Delivery,
benefits from SDL integration synergies, and favourable foreign
exchange movements with the strengthening of the US dollar relative
to a number of currencies.
ADMINISTRATIVE EXPENSES
Administrative expenses have increased to GBP263.9m (FY21:
GBP257.0m). Administrative expenses as a percentage of revenue have
decreased from 37% to 35%, which reflects the impact of the
integration activities during the period. Adjusted administrative
expenses (gross profit less adjusted operating profit) increased by
GBP17.0m to GBP211.7m, a rise of 9% year on year. The extra month
of costs from SDL, combined with unfavourable FX, more than offset
the benefit of integration synergies.
Exceptional items of GBP12.5m were incurred during the year,
which includes GBP7.4m for IT integration and GBP3.2m for
severance, termination and other costs in relation to the SDL
integration. Acquisition costs of GBP2.1m, were primarily related
to the purchase of Liones Holding B.V. during the period.
FINANCE COSTS
Net finance costs were GBP3.1m (FY21: GBP2.4m). Net finance
costs have increased year on year due primarily to an increase in
interest payable on external debt of GBP0.6m, driven by a rise in
interest rates. On 3 August 2022, the Group entered into an
Amendment and Restatement Agreement with its banking syndicate,
which amended its existing US$120m RCF maturing on 10 February
2024, to a US$220m RCF maturing on 3 August 2026, with an option to
extend maturity to 3 August 2027. This gives us further flexibility
as we continue to grow our business and seek selective acquisitions
to enhance the Group's capabilities and geographic reach. The debt
refinancing was accounted for as a debt modification without
extinguishment, resulting in a nominal debt modification gain being
recognised in the parent company's statement of comprehensive
income.
ADJUSTED PROFIT BEFORE TAX
Adjusted profit before tax ("Adj PBT") is stated before
amortisation of acquired intangibles, share-based payment expense,
acquisition costs, and exceptional items (see reconciliation in the
Alternative Performance Measures section). The Group uses adjusted
results as a key performance indicator, as the Directors believe
that these provide a more consistent and meaningful measure of the
Group's underlying performance across financial periods. The Adj
PBT of GBP135.7m (Adj PBT margin: 18.1%) recorded in the period has
increased from GBP116.4m (Adj PBT margin: 16.8%) in the prior
year.
TAX CHARGE
The Group's tax charge for the year was GBP20.5m (FY21:
GBP13.8m), representing an effective tax rate on profit before tax
of 24.6% compared with 25.1% in the prior financial year. The
corporate income tax rates in the overseas countries in which the
Group operates continue to be higher than the existing UK corporate
income tax rate of 19%, which results in a higher effective rate
than the headline UK rate.
EARNINGS PER SHARE AND DIVID
Basic earnings per share for the financial year increased from
10.9p to 16.1p, an increase of 48%, while adjusted basic earnings
per share increased from 23.8p to 26.6p, representing an increase
of 12%, which reflects the after tax impact of significant
adjusting items this financial year consequent to the acquisition
of SDL. The weighted average number of ordinary shares in issue for
basic and adjusted basic earnings increased from 378.5m to 389.4m,
principally due to the proportionate impact of the ordinary shares
issued in connection with the SDL acquisition in the prior
period.
A final dividend for the financial year end 30 September 2022 of
9.5 pence per share has been proposed, equivalent to GBP37.0m,
while an interim dividend of 2.25 pence per share, equivalent to
GBP8.7m, was paid during the financial period. A comparative final
dividend for the year ended 30 September 2021 of 8.5 pence per
share, equivalent to GBP33.1m, was paid in this financial
period.
The proposed total dividend for the year of 11.75 pence per
share represents a 12% increase on the total dividend relative to
the prior financial period of 10.5 pence per share.
BALANCE SHEET AND WORKING CAPITAL
Net assets at 30 September 2022 increased by GBP130.8m to
GBP1,141.7m. The main driver of this increase was the strengthening
USD, increasing dollar-denominated net assets by GBP119m.
Current assets at 30 September 2022 of GBP325.9m have increased
by GBP38.1m on the prior financial year, including an increase in
trade and other receivables of GBP28.7m. Cash and cash equivalents
balances of GBP101.2m have increased by GBP8.7m.
The increase in trade and other receivables is primarily driven
by the growth of the business in the period and includes an
increase in trade receivables of GBP15.2m and an increase in
accrued income of GBP16.3m. This increase reflects stronger
revenues during the financial year, whilst the average days' sales
outstanding (the calculation of which measures the number of days'
billings in trade receivables) has remained stable.
Current liabilities have also increased to GBP203.6m at 30
September 2022, an increase of GBP12.7m, primarily due to an
increase in trade and other payables balances of GBP13.6m.
Non-current liabilities have decreased by GBP14.4m, reflecting a
net reduction in loan balances under our RCF of GBP17.9m, a
reduction in other non-current liabilities of GBP3.7m, partly
offset by an increase in deferred tax liabilities of GBP7.2m.
CASH FLOW
Cash generated from operations was GBP148.8m, GBP46.8m more than
the prior financial year, when cash generated was GBP102.0m.
Operating cash flow before movements in working capital and
provisions increased from GBP125.5m to GBP157.5m. The net working
capital outflow of GBP8.7m has reduced by GBP14.8m from the prior
financial year's outflow of GBP23.5m. This has been driven by
improvement in payment cycles during the period, with outflows in
trade receivables from growth of the business offset by inflows
across trade payables.
Significant cash outflows from investing activities included net
cash consideration for the acquisitions of Liones Holding B.V of
GBP14.1m and purchases of intangible software of GBP24.3m.
Cash flows from financing activities included GBP25.5m in repaid
debt and associated interest, and dividends paid within the
financial year ended 30 September 2022 of GBP41.9m.
Cash balances at the financial year end amounted to GBP101.2m,
with external borrowings of GBP29.3m, excluding lease liabilities,
resulting in a net cash position of GBP71.9m (FY21: GBP92.5m cash
and external borrowings of GBP47.2m, resulting in net cash of
GBP45.3m). Net cash including lease liabilities was GBP25.2m (FY21:
net debt of GBP6.2m).
POST BALANCE SHEET EVENTS
No other significant events have occurred between the balance
sheet date and the date of authorising these financial
statements.
Rod Day
INTERIM DEPUTY CHIEF FINANCIAL OFFICER
14 December 2022
1 - Sources: OC&C, Slator, CSA, WIPO, EPO, Companies
House
2 - Adjusted operating profit is stated before amortisation of
acquired intangibles, acquisition costs, share-based payments
expense and exceptional items.
3 - Calculated as number of FTE leavers during the financial
year, divided by average number of FTEs during the year, noting the
constraints imposed by having multiple HR systems.
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2022
2022 2021
Note GBPm GBPm
Revenue 749.2 694.5
Cost of sales (399.0) (381.3)
-------- --------
Gross profit 350.2 313.2
Proceeds from warranty claim - 1.2
Administrative expenses (263.9) (257.0)
-------- --------
Operating profit 86.3 57.4
Analysed as:
Adjusted operating profit: 138.5 118.5
Amortisation of acquired intangibles (34.4) (34.4)
Acquisition costs (2.1) (11.2)
Share based payment expense (3.2) (1.4)
Exceptional items 5 (12.5) (14.1)
-------- --------
Operating profit 86.3 57.4
Finance income 0.2 -
Amortisation of capitalised exceptional
finance costs 5 (0.3) (0.3)
Finance costs (3.0) (2.1)
-------- --------
Profit before tax 83.2 55.0
Taxation 6 (20.5) (13.8)
-------- --------
Profit for the year attributable to the
owners of the Parent 62.7 41.2
Other comprehensive income/ (expense)
Items that may be reclassified to profit
or loss:
Gain/ (loss) on retranslation of quasi
equity loans (net of deferred tax) 6.1 (0.6)
Gain/ (loss) on retranslation of foreign
operations 107.3 (31.8)
(Loss)/ gain on hedging (net of deferred
tax) (6.7) 1.6
-------- --------
Total other comprehensive income/ (expense) 106.7 (30.8)
Total comprehensive income attributable
to owners of the Parent 169.4 10.4
-------- --------
Basic earnings per ordinary share (pence
per share) 8 16.1 10.9
Diluted earnings per ordinary share (pence
per share) 8 16.0 10.9
--------------------------------------------- ------ -------- --------
Consolidated Statement of Financial Position
as at 30 September 2022
Note 2022 2021
GBPm GBPm
Non-current assets
Goodwill 9 692.6 615.8
Intangible assets 10 385.4 366.6
Property, plant and equipment 31.3 32.1
Right-of-use assets 39.0 42.4
Non-current income tax receivable 1.0 1.0
Deferred tax assets 6 1.1 1.5
-------- --------
1,150.4 1,059.4
Current assets
Trade and other receivables 220.5 191.8
Income tax receivable 4.2 3.5
Cash and cash equivalents 12 101.2 92.5
-------- --------
325.9 287.8
-------- --------
Total assets 1,476.3 1,347.2
-------- --------
Current liabilities
Trade and other payables 165.6 152.0
Lease liabilities 11.8 11.0
Foreign exchange derivatives 0.6 0.7
Income tax payable 22.7 22.1
Provisions 2.9 5.1
-------- --------
203.6 190.9
-------- --------
Non-current liabilities
Loans 11 29.3 47.2
Lease liabilities 34.9 40.5
Trade and other payables 3.5 2.4
Provisions 4.9 4.1
Deferred tax liabilities 6 58.4 51.2
-------- --------
131.0 145.4
-------- --------
Total liabilities 334.6 336.3
Total net assets 1,141.7 1,010.9
-------- --------
Capital and reserves attributable to owners
of the Parent
Share capital 3.9 3.9
Share premium 54.4 54.2
Share based payment reserve 6.0 2.8
Reverse acquisition reserve (8.5) (8.5)
Merger reserve 624.4 624.4
Foreign currency reserve 95.9 (17.5)
Hedge reserve (5.5) 1.2
Retained earnings 371.1 350.4
--------------------------------------------- ----- -------- --------
Total equity 1,141.7 1,010.9
--------------------------------------------- ----- -------- --------
Consolidated Statement of Changes in Equity
for the year ended 30 September 2022
Other Total
Share reserves attributable
Share premium (see Retained to owners
capital account below) earnings of Parent
Notes GBPm GBPm GBPm GBPm GBPm
At 30 September 2020 2.8 53.6 7.4 345.1 408.9
Profit for the year - - - 41.2 41.2
Gain on hedging - - 1.6 - 1.6
Loss on retranslation of quasi
equity loans - - (0.6) - (0.6)
Loss on retranslation of foreign
operations - - (31.8) - (31.8)
--------- --------- ---------- ----------- --------------
Total comprehensive income
for the year - - (30.8) 41.2 10.4
Issue of shares - 0.6 - - 0.6
Issue of shares to acquire
subsidiary undertaking 1.1 - 624.4 - 625.5
Deferred tax on unexercised
share options - - - 0.4 0.4
Dividends - - - (36.0) (36.0)
Purchase of own shares (0.3) (0.3)
Equity-settled share based
payments charge - - 1.4 - 1.4
--------- --------- ---------- ----------- --------------
At 30 September 2021 3.9 54.2 602.4 350.4 1,010.9
Profit for the year - - - 62.7 62.7
Loss on hedging - - (6.7) - (6.7)
Gain on retranslation of quasi
equity loans - - 6.1 - 6.1
Gain on retranslation of foreign
operations - - 107.3 - 107.3
--------- --------- ---------- ----------- --------------
Total comprehensive income
for the year - - 106.7 62.7 169.4
Issue of shares - 0.2 - - 0.2
Deferred tax on unexercised
share options 6 - - - (0.1) (0.1)
Dividends 7 - - - (41.9) (41.9)
Equity-settled share based
payments charge - - 3.2 - 3.2
---------------------------------- ------ --------- --------- ---------- ----------- --------------
At 30 September 2022 3.9 54.4 712.3 371.1 1,141.7
---------------------------------- ------ --------- --------- ---------- ----------- --------------
Share
based Reverse Foreign Total
payment acquisition Merger currency Hedge other
reserve reserve reserve reserve reserve reserves
Other reserves GBPm GBPm GBPm GBPm GBPm GBPm
At 30 September 2020 1.4 (8.5) - 14.9 (0.4) 7.4
Other comprehensive (expense)/
income for the year - - - (32.4) 1.6 (30.8)
Issue of shares to acquire
subsidiary undertaking - - 624.4 - - 624.4
Equity-settled share based
payments charge 1.4 - - - - 1.4
--------- ------------- --------- ---------- ---------- ----------
At 30 September 2021 2.8 (8.5) 624.4 (17.5) 1.2 602.4
Other comprehensive income/
(expense) for the year - - - 113.4 (6.7) 106.7
Equity-settled share based
payments charge 3.2 - - - - 3.2
-------------------------------- --------- ------------- --------- ---------- ---------- ----------
At 30 September 2022 6.0 (8.5) 624.4 95.9 (5.5) 712.3
-------------------------------- --------- ------------- --------- ---------- ---------- ----------
Consolidated Statement of Cash Flows
for the year ended 30 September 2022
2022 2021
Note GBPm GBPm
Cash flows from operating activities
Profit before tax 83.2 55.0
Adjustments for:
Depreciation of property, plant and equipment 7.1 6.2
Amortisation of intangible assets 10 50.1 47.8
Depreciation of right-of-use assets 10.8 12.7
Share-based payment expense 3.2 1.4
Net finance costs 3.1 2.4
-------------------------------------------------- ------ ------- -------
Operating cash flow before movements in working
capital 157.5 125.5
(Increase) in trade and other receivables (5.6) (23.8)
(Decrease)/ increase in trade and other payables (3.1) 0.3
-------------------------------------------------- ------ ------- -------
Cash generated from operations 148.8 102.0
Income tax paid (21.3) (17.1)
-------------------------------------------------- ------ ------- -------
Net cash inflow from operating activities 127.5 84.9
-------------------------------------------------- ------ ------- -------
Cash flows from investing activities
Net cash acquired on acquisition of SDL plc - 55.0
Settlement of share related liabilities on
acquisition of SDL plc - (6.4)
Acquisition of subsidiary, net of cash acquired 13 (14.1) (1.5)
Purchases of property, plant and equipment (5.3) (4.1)
Purchases of intangibles (software) 10 (24.3) (19.1)
-------------------------------------------------- ------ ------- -------
Net cash (outflows)/ inflow from investing
activities (43.7) 23.9
-------------------------------------------------- ------ ------- -------
Cash flows from financing activities
Repayment of borrowings (25.5) (17.1)
Transaction costs relating to debt refinancing (1.5) -
Interest received 0.1 -
Interest paid (1.4) (0.6)
Lease liability payments (including interest
charged of GBP1.3m (2021: GBP1.5m)) (13.1) (12.6)
Proceeds from the issue of share capital 0.2 0.6
Purchase of own shares - (0.3)
Dividends paid 7 (41.9) (36.0)
-------------------------------------------------- ------ ------- -------
Net cash outflow from financing activities (83.1) (66.0)
-------------------------------------------------- ------ ------- -------
Net increase in cash and cash equivalents 0.7 42.8
-------------------------------------------------- ------ ------- -------
Cash and cash equivalents at beginning of
the year 92.5 51.4
Exchange gains/(losses) on cash and cash
equivalents 8.0 (1.7)
-------------------------------------------------- ------ ------- -------
Cash and cash equivalents at end of the year 12 101.2 92.5
-------------------------------------------------- ------ ------- -------
Notes to the Consolidated Financial Statements
1. Accounting policies
Basis of accounting and preparation of financial statements
The financial information is extracted from the Group's
consolidated financial statements for the year ended 30 September
2022, which were approved by the Board of Directors on 14 December
2022.
RWS Holdings plc ("the Parent Company") is a public company,
limited by shares, incorporated and domiciled in England and Wales
whose shares are publicly traded on AIM, the London Stock Exchange
regulated market.
The financial information set out in this announcement does not
constitute the Company's statutory accounts for the year ended 30
September 2022. Statutory accounts for 2021 have been delivered to
the registrar of companies, and those for 2022 will be delivered in
due course. The auditor has reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below and within
the notes to which they relate to provide context to users of the
financial statements. The policies have been consistently applied
to both years presented, unless otherwise stated.
The potential climate change-related risks and opportunities to
which the Group is exposed, as identified by management, are
disclosed in the Group's Annual Report and Accounts. Management has
assessed the potential financial impacts relating to the identified
risks and exercised judgement in concluding that there are no
further material financial impacts of the Group's climate-related
risks and opportunities on the financial statements. These
judgements will be kept under review by management as the future
impacts of climate change depend on environmental, regulatory and
other factors outside of the Group's control which are not all
currently known.
Going concern
In making their going concern assessment, the Directors have
considered the Group's current financial position and forecast
earnings and cashflows for the 18-month period ending 31 March
2024. The business plan used to support this going concern
assessment is derived from the Board-approved budget. The Directors
have undertaken a rigorous assessment of going concern and
liquidity taking into account key uncertainties and sensitivities
on the future performance of the Group. In making this assessment
the Directors have considered the Group's existing debt levels, the
committed funding and liquidity positions under its debt covenants
and its ability to continue generating cash from trading
activities.
As at 30 September 2022, the Group has net cash of GBP25.2m
comprising the Group's US$220m revolving credit facility ("RCF") (
GBP29.3m drawn at year end) and lease liabilities of GBP46.7m, less
cash and cash equivalents of GBP101.2m. The RCF matures in August
2026 but is extendable for a further year subject to lender
consent. At year end the Group's net leverage ratio (as defined by
the RCF agreement) is -0.11x EBITDA, while its interest coverage
ratio (as defined by the RCF agreement) is 64.2x EBITDA and are
well within the covenants permitted by the Group's RCF
agreement.
In light of the Group's principal risks and uncertainties, the
Directors believe that the appropriate sensitivity in assessing the
Group and Company's ability to continue as a going concern are to
model a range of reasonably plausible downside scenarios, including
a 10% reduction to the Group's revenues and corresponding cash
flows, with mitigating actions from management limited to
equivalent reductions in the Group's controllable cost base. No
significant structural changes to the Group have been assumed in
any of the downside scenarios modelled with all mitigating actions
wholly within management's control.
In each of these modelled downside scenarios, the Group
continues to have significant covenant and liquidity headroom over
the period through to 31 March 2024. Consequently, the Directors
are confident that the Group and Company will have sufficient cash
reserves and committed debt facilities to withstand reasonably
plausible downside scenarios and therefore continue to meet its
liabilities as they fall due for the period ending 31 March 2024
and therefore prepared the financial statements on a going concern
basis.
2. CRITICAL JUDGEMENTS AND ACCOUNTING ESTIMATES IN APPLYING THE
GROUP'S ACCOUNTING POLICIES
The preparation of the financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and judgements that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates.
These estimates and judgements are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
They are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively.
Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
Revenue - multi-element arrangements
To determine the appropriate revenue recognition for contracts
containing multi-elements that include both products and services,
we evaluate whether the contract should be accounted for as a
single, or multiple performance obligations. Management is required
to exercise a degree of judgement in setting the criteria used for
determining when revenue which involves several elements should be
recognised and the stand-alone selling price of each element. The
Group generally determines the stand-alone selling prices of
elements based on prices which are not observable and are therefore
based on stand-alone list prices which are then subject to
discount. These prices are reviewed on an annual basis and amended
where appropriate. This is performed in conjunction with a fair
value assessment of the stand-alone selling prices to assess
reasonableness of the transaction price allocation. Further detail
regarding the stand-alone selling prices for the purpose of
allocating the transaction price in multi-element arrangements is
provided in note 3.
The judgement could materially affect the timing and quantum of
revenue and profit recognised in each period. Licence revenue in
the year amounted to GBP55.2m (2021: GBP34.9m).
Licence revenue in the year amounted to GBP55.2m (2021:
GBP34.9m).
Capitalised development costs
The Group capitalises development costs relating to software
product development and internally generated software in line
within line with IAS 38 'Intangible Assets'. Management applies
judgement in determining if the costs meet the criteria and are
therefore eligible for capitalisation. Significant judgements
include the technical feasibility of the development,
recoverability of the costs incurred, economic viability of the
product, and potential market available considering its current and
future customers and when, in the development process, these
milestones have been met. Where software products are already in
use, management applies judgement in determining whether further
development spend increases the economic benefit and whether any
previously capitalised costs should be expensed. Development costs
capitalised during the year amounted to GBP22.6m (2021: GBP19.7m)
(see Note 10).
Estimates and assumptions
The Group has considered whether there are key assumptions and
estimates concerning the future and other key sources of estimation
uncertainty at the reporting date, that have significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities within the next financial year and there are none for
this financial year.
Other estimates and assumptions
Revenue - rendering of services
Management makes estimates of the total costs that will be
incurred on a contract by contract basis. Management reviews the
estimate of total costs on each contract on an ongoing basis to
ensure that the revenue recognised accurately reflects the
proportion of the work done at the balance sheet date. All
contracts are of a short-term nature. The majority of services work
is invoiced on completion and the amount of year end work in
progress was GBP51.2m (2021: GBP34.9m). The effect of changing the
estimated total cost of each contract could, in aggregate, have a
material effect on the carrying amount of accrued income at the
balance sheet date.
Impairment of goodwill and intangible assets
An impairment test of goodwill (performed annually) and other
intangible assets (when an indicator of impairment exists),
requires estimation of the value in use of the CGUs to which
goodwill and other intangible assets have been allocated. The value
in use calculation requires the Group to estimate the future cash
flows expected to arise from the CGUs, for which the Group
considers revenue growth rates to be a significant estimate. The
estimated future cash flows derived are discounted to their present
value using a pre-tax discount rate that reflects estimates of
market risk premium, asset betas, the time value of money and the
risks specific to the CGU. See Note 9 and 10 for further
details.
Taxation - uncertain tax positions
Uncertainties exist in respect of interpretation of complex tax
regulations, including transfer pricing, and the amount and timing
of future taxable income. Given the nature of the Group's operating
model, the wide range of international transactions and the
long-term nature and complexity of contractual agreements,
differences arising between the actual results and assumptions
made, or future changes to assumptions, could necessitate future
adjustments to taxation already recorded. The Group considers all
tax positions on a separate basis, with any amounts determined by
the most appropriate of either the expected value or most likely
amount on a case by case basis.
Most deferred tax assets are recognised because they can offset
the future taxable income from existing taxable differences
(primarily on acquired intangibles) relating to same jurisdiction
or entity. Where there are insufficient taxable differences,
deferred tax assets are recognised in respect of losses and other
deductible differences where current forecasts indicate profits
will arise in future periods against which they can be deducted.
The total value of UTPs was GBP6.8m (2021: GBP6.5m), see Note
6.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Accounting Policy
IFRS 15 provides a single, principles based five step model to
be applied to all sales contracts as outlined below. It is based on
the transfer of control of goods and services to customers and
replaces the separate models for goods and services. The specific
application of the five step principles of IFRS 15 as they apply to
the Group's revenue contracts with customers are explained below at
an income stream level. In addition to this, the individual
performance obligations identified within the Group's contracts
with customers are individually described as part of this note to
the financial statements.
For multi-element arrangements, revenue is allocated to each
performance obligation based on stand-alone selling price,
regardless of any separate prices stated within the contract. This
is most common within the Group's contract for technology licences,
which may include performance obligations in respect of the
licences, support and maintenance, hosting services and
professional services. The Group's software licences are either
perpetual, term or software as a service (SaaS) in nature. The
Group's revenue contracts do not include any material future vendor
commitments and thus no allowances for future costs are made.
The allocation of transaction price to these obligations is a
significant judgement, more details of the nature and impact of the
judgement are included in Note 2. The identification of the
performance obligations within some multi-element arrangements
involves judgement, however none of the Group's contracts requires
significant judgement in this regard.
Language Services contracts are typically billed in arrears on
completion of the work with revenue recognised as accrued income
balances. Patent filing contracts are typically billed in arrears
on completion of the work with revenue recognised as accrued income
balances. The Group's technology contracts are typically billed in
advance and revenue recognition deferred where the performance
obligation is satisfied over time. The Group's contracts for term
licenses are recognised upfront when performance obligations are
delivered in the same manner as a perpetual license sale but,
typically, are billed annually and do not follow the same billing
pattern as the Group's contracts for perpetual licenses, instead
billing follows more closely that of a SaaS license contract.
Disaggregated information about the Group's revenue recognition
policy and performance obligations are summarised below:
Patent Filing Services (IP Services segment)
The Group's Patent Filing revenue contracts with customers
include a sole performance obligation which is satisfied at a point
in time, being the completion of patent filing and delivery to the
client. Revenue is recognised when the sole performance obligation
is satisfied, which is when the benefits of control of the services
provided are delivered to the customer.
Language Services (IP Services, Language Services and Regulated
Industries segments)
The Group's Language Services contracts with customers provide
for the Group to be reimbursed for their performance under the
contract as the work is undertaken. Accordingly, as the Group has
both the right to payment and no alternative use for the translated
asset, the Group recognises revenue over time for this performance
obligation.
The Group measures the completeness of this performance
obligation using input methods. The relevant input method is the
cost incurred to date as a proportion of total costs, in
determining the progress towards the completion of the performance
obligation for Language Services contracts.
Perpetual and term licences (Language and Content Technology
segment)
The Group's perpetual and term licences are accounted for at a
point in time when the customer obtains control of the licence,
occurring either where the goods are shipped or, more commonly,
when electronic delivery has taken place and there is no
significant future vendor obligation.
The software to which the licence relates has significant
standalone functionality and the Group has determined that none of
the criteria that would indicate the licence is a right to access
apply. In addition, the Group has identified no other performance
obligations under their contracts for these licences which would
require the Group to undertake significant additional activities
which affects the software. The Group therefore believes the
obligation is right to use the licence as it presently exists and
therefore applies the point in time pattern of transfer.
Transaction price is allocated to licenses using the residual
method based upon other components of the contract. The residual
method is used because the prices of licenses are highly variable
and there is no discernible standalone selling price from past
transactions.
'SaaS' licences (Language and Content Technology segment)
Unlike the Group's perpetual and term licences, the Group has
identified that there are material ongoing performance obligations
associated with the provision of SaaS licences. The Group has
identified that this creates a right to access the intellectual
property, instead of a right to use. Accordingly, the associated
licence revenue is recognised over time, straight line for the
duration of the contract. As with other licences, the Group
utilises the residual method to allocate transaction price to these
performance obligations.
Support and maintenance (Language and Content Technology
segment)
Support and maintenance represents a stand ready obligation to
provide additional services to the Group's licence customers over
the period of support included in the contract. The Group measures
the obligation by reference to the standalone selling price, based
upon internal list prices subject to discount. The pattern of
transfer is deemed to be over time on the basis that this is a
continuing obligation over the period of support undertaken and
accordingly, recognised as revenue on a straight line basis over
the course of the contract.
Hosting services (Language and Content Technology segment)
The Group provides managed services (hosting) as part of certain
contracts with customers. The pattern of transfer for the service
is such that the customer simultaneously receives and consumes the
benefits provided by the Group and therefore, is recognised over
time for the duration of the agreement. Transaction price from the
contract is allocated to hosting services obligations based upon a
cost plus method.
Professional services (Language and Content Technology
segment)
The Group provides professional services to customers including
training, implementation and installation services alongside
certain contracts for software licences. These services are sold in
units of consultant time and are therefore measured on an output
method basis. Revenue is therefore recognised on these engagements
based on the units of time delivered to the end customer.
Transaction price is allocated based upon the standalone selling
price, calculated by reference to the internal list prices for
consultant time subject to any discounts. A small number of the
Group's professional services contracts are on a fixed price
contract and the output method is used based on an appraisal of
applicable milestones.
Revenue from contracts with customers
The Group generates all revenue from contracts with its
customers for the provision of translation and localisation,
intellectual property support solutions and the provision of
software. Revenue from providing these services during the year is
recognised both at a point in time and over time as shown in the
table below:
Timing of revenue recognition for contracts with
customers 2022 2021
GBPm GBPm
-------------------------------------------------- ------ -------
At a point in time 21.2 25.3
Over time 86.0 88.3
IP Services 107.2 113.6
-------------------------------------------------- ------ -------
At a point in time 26.0 24.0
Over time 100.9 84.1
Language and Content Technology 126.9 108.1
-------------------------------------------------- ------ -------
Over time 342.1 309.7
Language Services 342.1 309.7
-------------------------------------------------- ------ -------
Over time 173.0 163.1
R egulated Industries 173.0 163.1
-------------------------------------------------- ------ -------
Total revenue from contracts with customers 749.2 694.5
-------------------------------------------------- ------ -------
See note 4 for information on revenue disaggregation by
geographical location.
Capitalised contract costs
Capitalised contract costs primarily relate to sales commission
costs capitalised under IFRS15 and are amortised over the length of
the contract. The group has taken advantage of the practical
expedient to recognise, as an expense, any costs which would be
recognised in fewer than 12 months from being incurred. This
primarily relates to the Group's language services commissions and
point in time technology revenue related commissions. The value of
capitalised contract costs at year end was GBP1.9m (2021: GBP2.7m).
Capitalised contract costs are recognised within other debtors on
the statement of financial position.
Receivables, contract assets and contract liabilities with
customers
Receivables, contract assets and 2022 2021
contract liabilities GBPm GBPm
Net trade receivables 148.9 133.7
Contract assets (accrued income) 51.2 34.9
Contract liabilities (deferred
income) (53.0) (43.0)
Contract assets are recognised where performance obligations are
satisfied over time until the point at which the Group's right to
consideration is unconditional when these are classified as trade
receivables which, is generally the point of final invoicing.
For performance obligations satisfied over time, judgement is
required in determining whether a right to consideration is
unconditional. In such situations, a receivable is recognised for
the transaction price of the non-cancellable portion of the
contract when the Group starts satisfying the performance
obligation. The Group recognises revenue for partially satisfied
performance obligations as 'Accrued Income'.
The total value of the transaction price allocated to
unsatisfied or partially unsatisfied performance obligations at the
year-end is GBP54.1m (2021: GBP49.1m). Support and maintenance is a
stand ready obligation discharged straight line over the duration
of the Group's software contracts, the period over which this is
recognised can be identified based on the value of current and
non-current deferred income. Unsatisfied performance obligations in
respect of language and professional services are all short-term
and expected to be recognised in less than one year.
The Group offsets any contract liabilities with any contract
assets that may arise within the same customer contract, typically,
this only applies to the Group's licence and support and
maintenance revenue contracts. In all material respects there are
no significant changes in the Group's contract asset or liability
balances other than business-as-usual movements during the
year.
Revenue recognised in the year that was included in deferred
revenue at 1 October 2021 was GBP40.8m (2021: GBP1.7m).
4. Segment Information
The chief operating decision maker for the Group is identified
as the Group's Board of Directors collectively. The Board reviews
the Group's internal reporting in order to assess performance and
allocates resources. The Board divides the Group into four
reportable segments and assess the performance of each segment
based on the revenue and adjusted profit before tax.
The four reporting segments, which match the operating segments,
are explained in more detail below:
-- Language Services: The revenues are derived by providing
localisation services which include translation and adaptation of
content across a variety of media and materials to ensure brand
consistency.
-- Regulated Industries: Revenue is generated through the
translation and linguistic validation for customers who operate in
regulated industries such as life sciences.
-- IP Services: The Group's IP Services segment provides high
quality patent translations, filing services and a broad range of
intellectual property ("IP") search services.
-- Language and Content Technology ("L&CT"): Revenue is
generated through the provision of a range of translation
technologies and content platforms to clients. This was enhanced by
the acquisition of Liones Holding B.V. in March 2022.
Unallocated costs reflect corporate overheads and other expenses
not directly attributed to segments.
Segment results for the year
ended 30 September 2022 Regulated Language Unallocated
L&CT IP Services Industries Services Costs Group
GBPm GBPm GBPm GBPm GBPm GBPm
------ ------------ ------------ ---------- -------------- -------
Revenue from contracts with
customers 126.9 107.2 173.0 342.1 - 749.2
Operating profit/(loss) before
charging: 37.6 30.1 31.6 53.3 (14.1) 138.5
Amortisation of acquired intangibles (8.0) (0.2) (12.4) (13.8) - (34.4)
Acquisition costs - - - - (2.1) (2.1)
Exceptional items (see note
5) (3.0) (0.5) (2.3) (3.9) (2.8) (12.5)
Share-based payment expense (1.8) (0.2) (0.3) (0.4) (0.5) (3.2)
-------------------------------------- ------ ------------ ------------ ---------- -------------- -------
Profit from operations 24.8 29.2 16.6 35.2 (19.5) 86.3
Net finance expense (3.1)
-------
Profit before taxation 83.2
Taxation (20.5)
-------
Profit for the year 62.7
-------------------------------------- ------ ------------ ------------ ---------- -------------- -------
Segment results for the year
ended 30 September 2021 L&CT Regulated Language Unallocated
[1] IP Services Industries Services1 Costs Group
GBPm GBPm GBPm GBPm GBPm GBPm
------ ------------ ------------ ----------- -------------- -------
Revenue from contracts with
customers 108.1 113.6 163.1 309.7 - 694.5
Operating profit/(loss) before
charging: 25.9 32.3 28.4 44.1 (12.2) 118.5
Amortisation of acquired intangibles (7.4) (0.1) (14.5) (12.4) - (34.4)
Acquisition costs 0.0 0.0 0.0 0.0 (11.2) (11.2)
Exceptional items (see note
5) 0.0 (5.0) (0.2) (1.6) (7.3) (14.1)
Share-based payment expense (0.8) (0.2) (0.1) (0.2) (0.1) (1.4)
-------------------------------------- ------ ------------ ------------ ----------- -------------- -------
Profit/(loss) from operations 17.7 27.0 13.6 29.9 (30.8) 57.4
Net finance expense (2.4)
-------
Profit before taxation 55.0
Taxation (13.8)
-------
Profit for the year 41.2
-------------------------------------- ------ ------------ ------------ ----------- -------------- -------
[1] Webdunia was previously included in Language Services and is
now part of L&CT. This comparative table has been restated to
reflect this change
The table below shows revenue by the geographic market in which
clients are located.
Revenue by client location
2022 2021
GBPm GBPm
UK 85.9 77.3
Continental Europe 178.2 213.8
United States of America 390.2 322.9
Rest of the world 94.9 80.5
---------------------------- ------- ------
Total 749.2 694.5
---------------------------- ------- ------
The Group does not place reliance on any specific customer and
has no individual customers that generate more than 10% or more of
its total Group revenue.
The following is an analysis of revenue by the geographical area
in which the Group's undertakings are located.
Revenue by subsidiary location
2022 2021
GBPm GBPm
UK 189.5 175.1
Continental Europe 166.6 174.1
United States of America 339.0 297.3
Rest of the world 54.1 48.0
-------------------------------- ------- -------
Total 749.2 694.5
-------------------------------- ------- -------
The table below shows operating assets by geographical location
of the Group's undertakings. These assets exclude goodwill and
acquired intangibles.
Operating assets by geography FY22 FY21
GBPm GBPm
UK 162.7 148.0
Continental Europe 79.0 76.3
United States of America 147.2 118.6
Rest of the World 67.5 61.5
------------------------------- ------- -------
Total 456.4 404.4
------------------------------- ------- -------
5. exceptional items
Accounting policy
Exceptional items are those items that in management's judgement
should be disclosed separately by virtue of their size, nature or
incidence, in order to provide a better understanding of the
underlying financial performance of the Group. In determining
whether an event or transaction is exceptional, management
considers qualitative factors such as frequency or predictability
of occurrence. Examples of exceptional items include the costs of
integration, severance and restructuring costs which Management do
not believe reflect the business's trading performance and
therefore are adjusted to present consistency between periods.
2022 2022 2022 2021 2021 2021
Pre-tax Tax impact Total Pre-tax Tax Total
GBPm GBPm GBPm GBPm impact GBPm
GBPm
Group transformation
programme (0.3) 0.1 (0.2) (4.8) 1.2 (3.6)
Restructuring & integration
related costs (12.2) 2.4 (9.8) (10.5) 2.3 (8.2)
Proceeds from warranty
claim - - - 1.2 - 1.2
----------------------------- --------- ------------ ------- --------- -------- -------
Total exceptional items
- operating (12.5) 2.5 (10.0) (14.1) 3.5 (10.6)
Amortisation of exceptional
finance (0.3) - (0.3) (0.3) - (0.3)
----------------------------- --------- ------------ ------- --------- -------- -------
Total exceptional items
- financing (0.3) - (0.3) (0.3) - (0.3)
----------------------------- --------- ------------ ------- --------- -------- -------
Total exceptional items (12.8) 2.5 (10.3) (14.4) 3.5 (10.9)
----------------------------- --------- ------------ ------- --------- -------- -------
As part of a strategic review of the business, the Group has
initiated a transformation programme for Finance and Human
Resources to drive improved efficiencies in future periods. In
2022, GBP0.5m of cost was incurred and paid during the period. The
Group expects to incur and pay further material costs over the next
2 years related to the transformation totalling GBP15.9m and the
ongoing benefits from the integration will be recognised in
operating profit in the statement of comprehensive income.
Included with restructuring and integration costs are GBP3.2m of
severance agreements and termination payments included within the
businesses defined integration plan for SDL plc. A further GBP7.4m
was incurred in respect of IT integration projects, all of which
was paid during the period. An additional GBP1.6m was incurred and
paid in respect of contract termination costs to rehouse the
Group's data warehousing capability for the integrated business.
The cost of delivering synergies is classified as exceptional to
highlight the expense of delivering the integration and represent
costs which are considered by the Group to be outside the normal
course of business.
In FY20, a settlement was agreed for a claim made by the Group
under warranty insurance taken out as part of the Moravia
acquisition in 2017. In FY21, a final amount of GBP1.2m was
received relating to this settlement claim.
Exceptional finance costs of GBP0.3m (2021: GBP0.3m) relate to
the amortisation expense associated with a gain on debt
modification recognised in previous accounting periods.
6. TAXATION
Accounting Policy
The charge for current taxation is based on the results for the
year as adjusted for items which are non-assessable or disallowed.
It is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date. Current tax assets
and liabilities are offset when the relevant tax authority permits
net settlement and the group intends to settle on a net basis.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes where this differs.
Deferred tax is not recognised for temporary differences related
to investments in subsidiaries and associates where the Group is
able to control the timing of the reversal of the temporary
difference and it is probable that this will not reverse in the
foreseeable future; on the initial recognition of non-deductible
goodwill; and on the initial recognition of an asset or liability
in a transaction that is not a business combination and that, at
the time of the transaction, does not affect the accounting or
taxable profit.
Deferred tax is measured on an undiscounted basis, and at the
tax rates that have been enacted or substantively enacted by the
reporting date that are expected to apply in the periods in which
the asset or liability is settled
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which they can be used and are reviewed at each reporting date.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority, when the
Group intends to settle its current tax assets and liabilities on a
net basis and that authority permits the Group to make a single net
payment.
Current and deferred tax is recognised in the income statement
except when it relates to items credited or charged directly to
other comprehensive income or equity, in which case the current or
deferred tax is also recognised within other comprehensive income
or equity respectively (for example share-based payments).
Uncertain tax positions
The Group operates in numerous tax jurisdictions around the
world. At any given time, the Group is involved in disputes and tax
audits and will have a number of tax returns potentially subject to
audit, significant issues may take several years to resolve. In
estimating the probability and amount of any tax charge, management
takes into account the views of internal and external advisers and
updates the amount of tax provision whenever necessary. The
ultimate tax liability may differ from the amount provided
depending on interpretations of tax law, settlement negotiations or
changes in legislation. As referenced in note 2, the Group
considers all tax positions separately and uses either the most
likely or expected value method of calculation on a case by case
basis.
VAT
Revenues, expenses and assets are recognised net of the amount
of VAT except where the VAT incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which
case the VAT is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable; and trade
receivables and payables are stated with the amount of VAT
included. The net amount of VAT recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the balance sheet.
2022 2021
GBPm GBPm
Current Tax Charge
- UK corporation tax at 19% (2021: 19%) 5.7 4.7
- Overseas current tax charge 18.7 15.9
Adjustment in respect of previous years (4.2) (3.0)
--------------------------------------------------- ------ ------
Deferred Tax Charge
Origination and reversal of temporary differences (2.4) (4.4)
Rate change impact 0.1 2.0
Adjustment in respect of previous years 2.6 (1.4)
--------------------------------------------------- ------ ------
Total tax expense in profit or loss 20.5 13.8
Total tax charge in equity 0.1 (0.4)
Total tax in other comprehensive income 0.7 0.2
--------------------------------------------------- ------ ------
Total tax charge for the year 21.3 13.6
--------------------------------------------------- ------ ------
Reconciliation of the Group's tax charge to the 2022 2021
UK statutory rate: GBPm GBPm
Profit before taxation 83.2 55.0
Notional tax charge at UK corporation tax rate
of 19.0% (2021: 19.0%) 15.8 10.4
Effects of:
Expenses not deductible for tax purposes 2.2 2.4
Adjustments in respect of previous years (1.6) (4.4)
Changes in tax rates 0.1 2.0
Higher/(lower) tax rates on overseas earnings 4.0 3.4
------------------------------------------------- ------ ------
Tax charge as per the income statement 20.5 13.8
------------------------------------------------- ------ ------
Effective tax rate 24.6% 25.1%
------------------------------------------------- ------ ------
Factors that may affect future tax charges
The Group's taxation strategy is aligned to its business
strategy and operational needs. The Directors are responsible for
tax strategy supported by a global team of tax professionals and
advisers. RWS strives for an open and transparent relationship with
all tax authorities and are vigilant in ensuring that the Group
complies with current tax legislation.
The Group's effective tax rate for the year is higher than the
UK's statutory tax rate due to the impact of non-tax deductibility
of acquisition costs, offset by the impact of recognizing historic
US Research and Development tax credits related to the period
FY16-FY21. The Group's tax rate is also sensitive to the geographic
mix of profits and reflects a combination of higher rates in
certain jurisdictions, such as Germany and Japan, a lower rate in
the UK and Czech Republic with other rates that lie in between.
The majority of the adjustments in respect of prior periods
relates to historic Research and Developments tax credits
recognised in the US of a GBP1.6m credit to deferred taxes. In
addition , a GBP4.5m credit to current tax and GBP3.9m debit to
deferred tax has been recognised as an adjustment to prior periods
representing the impact of the reduction of historic uncertain tax
positions recognised for transfer pricing that are outside the
relevant jurisdictional statute of limitations.
Transfer Pricing
Tax liabilities are recognised when it is considered probable
that there will be a future outflow of funds to a tax authority.
The methodology used to estimate liabilities is set out in Note 2.
In common with other multinational companies and given the Group
has operations in 39 countries, transfer pricing arrangements are
in place covering transactions that occur between Group
entities.
The Group periodically reviews its historic uncertain tax
positions ('UTPs') for transfer pricing and whilst it is not
possible to predict the outcome of any pending tax authority
investigations, adequate provisions are considered to be included
in the Group accounts to cover any expected estimated future
settlement. In carrying out this review, and subsequent
quantification, management has made judgements, taking into
account: the status of any unresolved matters; strength of
technical argument and clarity of legislation; external advice,
statute of limitations and any expected recoverable amounts under
the Mutual Agreement Procedure ('MAP'). During the period the Group
reduced the provision for liabilities that are expected to no
longer be sought by tax authorities on the basis that the relevant
statute of limitations has expired. In addition, UTPs related to
transfer pricing were increased during the year to reflect current
period trading as well as new historic risks identified during the
period.
The current tax liability of GBP22.7m on the balance sheet
comprises GBP15.2m of uncertain tax provisions, although it is not
expected that these will be cash settled within 12 months of the
year end date. The deferred tax liability of GBP58.4m on the
balance sheet is net of GBP6.5m of deferred tax assets relating to
uncertain tax positions.
Pillar Two
On 20 December 2021, the OECD published their proposals in
relation to Global Anti-Base Erosion Rules, which provide for an
internationally co-ordinated system of taxation to ensure that
large multinational groups pay a minimum level of corporate income
tax in countries where they operate. In January 2022 the UK
government reconfirmed its intention to introduce legislation to
give effect to the OECD proposals. The new rules are expected to
take effect from 2023 onwards, however the impact on the Group will
depend on the precise rules adopted in individual countries which
are not known at this time.
Share Accelerated Other
based capital temporary Acquired
payments allowances differences intangibles Tax losses Total
Deferred tax GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------- ------------ -------------- ------------- ----------- --------
At 1 October 2020 0.2 (1.1) 1.0 (28.5) - (28.4)
Adjustments in respect
of prior years (0.3) (0.5) 1.6 (0.3) 0.9 1.4
Acquisitions* 0.1 0.1 2.6 (44.4) 15.3 (26.3)
Credited to income 0.2 (0.2) 1.8 0.5 0.1 2.4
Credited to equity
/ OCI 0.4 - - - - 0.4
Foreign exchange differences - - (0.2) 1.1 (0.1) 0.8
---------- ------------ -------------- ------------- ----------- --------
At 30 September 2021 0.6 (1.7) 6.8 (71.6) 16.2 (49.7)
Adjustments in respect
of prior years - (0.1) 1.7 - (4.2) (2.6)
Acquisitions - - - (2.5) - (2.5)
Credited to income - - 0.4 4.4 (2.5) 2.3
Charged to equity
/ OCI (0.1) - - - - (0.1)
Foreign exchange differences - - 0.9 (6.0) 0.4 (4.7)
------------------------------ ---------- ------------ -------------- ------------- ----------- --------
At 30 September 2022 0.5 (1.8) 9.8 (75.7) 9.9 (57.3)
------------------------------ ---------- ------------ -------------- ------------- ----------- --------
* The acquisitions line includes GBP0.9m of deferred tax in
respect of the Moravia error correction referenced in this note
Deferred tax assets and liabilities are presented on the balance
sheet after jurisdictional netting as follows:
2022 2021
GBPm GBPm
Deferred tax assets 1.1 1.5
Deferred tax liabilities (58.4) (51.2)
---------------------------- ------- -------
Net deferred tax liability (57.3) (49.7)
---------------------------- ------- -------
Deferred tax assets and liabilities
Deferred tax is calculated using tax rates that are expected to
apply in the period when the liability has been settled or the
asset realised based on tax rates that have been enacted or
substantively enacted at the reporting date.
Most deferred tax assets are recognised because they can offset
the future taxable income from existing taxable differences
(primarily on acquired intangibles) relating to same jurisdiction
or entity. Where there are insufficient taxable differences,
deferred tax assets are recognised in respect of losses and other
deductible differences where current forecasts indicate profits
will arise in future periods against which they can be
deducted.
Losses
At the balance sheet date the Group has unused tax losses of
GBP143.9m (2021: GBP143.0m) available for offset against future
profits. A deferred tax asset of GBP9.9m (2021: GBP16.7m) has been
recognised in respect of GBP44.0m (2021: GBP72.6m) of such losses.
These losses include corresponding adjustments that could be
claimed on settlement of uncertain tax positions with overseas tax
authorities as accounted for under IFRIC 23.
No deferred tax asset has been recognised in respect of the
remaining GBP99.9m (2021: GBP70.4m) as these can only be used to
offset limited types of profits and as it is not considered
probable that there will be the required type of future trading or
non-trading profits available in the correct entities necessary to
permit offset and recognition.
The unrecognised deferred tax asset on losses is GBP23.5m (2021:
GBP17.7m).
Recognised deferred tax assets principally relate to UK and US
activities of the acquired SDL business.
The Group has recognised deferred tax assets on losses in the US
which have a 20 year expiry date and expects to use these losses in
this period, the earliest date these losses expire is 31 December
2033 and at the year-end losses amounted to GBP6.0m (2021:
GBP10.0m).
Unremitted earnings
Dividends received from subsidiaries are largely exempt from UK
tax but may be subject to dividend withholding taxes levied by the
overseas tax jurisdictions in which the subsidiaries operate. The
gross temporary differences of those subsidiaries affected by such
potential taxes is GBP82.3m. Since the Group is able to control the
timing of reversal of these temporary differences, a current tax
liability of GBP0.2m has been recognised on the unremitted earnings
it is anticipating to be distributed that would give rise to a tax
charge. The Group has an estimated unrecognised deferred tax
liability of GBP4.7m of unremitted earnings where no distributions
are expected to be paid in the foreseeable future.
7. DIVIDS TO SHAREHOLDERS
Accounting policy
Dividends payable to the Parent Company's shareholders are
recognised as a liability in the Group's financial statements in
the period in which dividends are approved by the Parent Company's
shareholders.
2022 2021
GBPm GBPm
Final ordinary dividend for the year ended 30
September 2021 was 8.5p (2020: 7.5p) 33.1 28.2
Interim dividend, paid 22 July 2022 was 2.25p
(2021: 2.00p paid 16 July 2021) 8.8 7.8
----------------------------------------------- ------ ------
41.9 36.0
----------------------------------------------- ------ ------
The Directors recommend a final dividend in respect of the
financial year ended 30 September 2022 of 9.5 pence per ordinary
share, to be paid on 24 February 2023 to shareholders who are on
the register at 27 January 2023. This dividend is not reflected in
these financial statements as it does not represent a liability at
30 September 2022. The final proposed dividend will reduce
shareholders' funds by an estimated GBP37.0m.
8. EARNINGS PER SHARE
Accounting policy
Basic earnings per share
Basic earnings per share is calculated using the Group's profit
after tax and the weighted average number of ordinary shares in
issue during the year.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the basic
earnings per share for the effects of share options and awards
granted to employees. These are included in the calculation when
their effects are dilutive.
Adjusted earnings per share
Adjusted earnings per share is a trend measure, which presents
the long-term profitability of the Group, excluding the impact of
specific transactions that management considers affects the Group's
short-term profitability. The Group presents this measure to assist
investors in their understanding of trends. Adjusted earnings is
the numerator used for this measure. Adjusted earnings and adjusted
earnings per share are therefore stated before amortisation of
acquired intangibles, acquisition costs, share based payment
expenses and exceptional items, net of any associated tax
effects.
The reconciliation between the basic and adjusted earnings per
share is as follows:
2021
2022 2021 2022 Diluted
Basic Basic Diluted earnings
earnings earnings earnings per
2022 2021 per share per share per share share
GBPm GBPm pence pence pence pence
------------------------------- ------- ------ ----------- ----------- ------------ ----------
Profit for the year 62.7 41.2 16.1 10.9 16,0 10.9
------- ------ ----------- ----------- ------------ ----------
Adjustments:
Amortisation of acquired
intangibles 34.4 34.4
Acquisition costs 2.1 11.2
Share based payments
expense 3.2 1.4
Net gain of debt modification 0.3 0.3
Exceptional items 12.5 14.1
Tax effect of adjustments (10.0) (7.3)
Tax adjustments in respect
of prior years (1.6) (4.5)
------------------------------- ------- ------ ----------- ----------- ------------ ----------
Adjusted earnings 103.6 90.8 26.6 23.8 26.5 23.8
------------------------------- ------- ------ ----------- ----------- ------------ ----------
2022 2021
Number Number
Weighted average number of ordinary shares
in issue for basic earnings 389,374,854 378,460,314
Dilutive impact of share options 1,469,514 648,504
------------ ------------
Weighted average number of ordinary shares
for diluted earnings 390,844,368 379,108,818
------------ ------------
9. GOODWILL
Cost and net book value 2022 2021
GBPm GBPm
At 1 October 615.8 257.2
Additions (note 13) 7.8 378.6
Adjustments in respect of prior periods (note 6) (0.4) (1.0)
Exchange adjustments 69.4 (19.0)
-------------------------------------------------- ------ -------
At 30 September 692.6 615.8
-------------------------------------------------- ------ -------
Accounting policy
Goodwill arising on business combinations (representing the
excess of fair value of the consideration given over the fair value
of the separable net assets acquired) is capitalised, and its
subsequent measurement is based on annual impairment reviews, with
any impairment losses recognised immediately in profit or loss in
the statement of comprehensive income. Direct costs of acquisition
are recognised immediately in profit or loss in the statement of
comprehensive income as an expense.
At least annually, or when otherwise required, Directors review
the carrying amounts of the Group's property, plant and equipment
and intangible assets to determine whether there is any indication
of an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of any impairment loss. A full impairment review is
performed annually for goodwill regardless of whether an indicator
of impairment exists.
The recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money as well as risks specific to the asset (or
cash generating unit ("CGU")) for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately in profit or loss in the
consolidated statement of comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but not beyond the carrying amount that would
have been determined had no impairment loss been recognised for the
asset in prior years. A reversal of an impairment loss is
recognised immediately as income in the Consolidated Statement of
Profit or Loss, although impairment losses relating to goodwill may
not be reversed.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its CGU. Goodwill is allocated
on initial recognition to each of the Group's CGUs that are
expected to benefit from the synergies of the combination giving
rise to the goodwill. Goodwill is allocated at the lowest level
monitored by management, and no higher than an operating
segment.
Key assumptions for the value in use Long-term Average
- 30 September 2022 growth Discount revenue
rate rate growth
IP Services 2.0% 12.5% 3.2%
Regulated Industries 2.0% 13.2% 6.7%
Language Services 2.0% 12.7% 5.1%
Language and Content Technology 2.0% 13.5% 10.9%
Key assumptions for the value in use
- 30 September 2021
IP Services 2.0% 10.4% 4.0%
Life Sciences 2.0% 10.9% 5.5%
Moravia 2.0% 11.0% 5.5%
SDL - Technology 2.0% 11.4% 8.0%
SDL - Language Services 2.0% 11.1% 5.5%
SDL - Regulated industries 2.0% 12.3% 5.5%
During the year, management has reviewed its identified CGUs in
light of the further integration work that has been performed by
the Group since the acquisition of SDL plc in November 2020, and
based on the result of this review, management believes the Group
now has four CGUs. Key factors of the integration in the year that
were considered in management's conclusion included the integration
of delivery of services to customers across fRWS and fSDL
businesses and commencing to internally report and plan resources
on the combined businesses.
In accordance with IAS 36, management performed a value in use
impairment test on the pre-existing six CGUs and determined there
to be no impairment of goodwill within any CGU. Following this
impairment test the Life Sciences and SDL - Regulated Industries
CGUs were merged to form the Regulated Industries CGU.
Additionally, the Moravia and SDL - Language Services CGUs are also
merged to form a Language Services CGU.
At year end management has performed an additional value in use
impairment test on the Group four CGUs as detailed further
below.
The key assumptions for the value in use calculations are those
regarding discount rates and revenue growth rates. All of these
assumptions have been reviewed during the year. Management
estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risk specific
to each CGU.
This has resulted in a range of discount rates being used within
the value in use calculations.
Determination of key assumption s
The long-term growth rate is the rate applied to determine the
terminal value on year five cash flows. This rate is determined by
the long term compound annual growth rate in adjusted operating
profit as estimated by Management with reference to external
benchmarks.
The discount rate is the pre-tax discount rate calculated by
Management based on a series of inputs starting with a risk free
rate based on the return on long term, zero coupon government
bonds. The risk free rate is adjusted with a beta to reflect
sensitivities to market changes, before consideration of other
factors such as a size premium.
Revenue growth is the average annual increase in revenue over
the five-year projection period. The revenue growth rate is
determined by Management based on the most recently prepared budget
for the future period and adjusted for longer term developments
within operating segments where such developments are known and
possible to reliably forecast.
As part of the value in use calculation, management prepares
cash flow forecasts derived from the most recent financial budgets
and 5 year plan, both approved by the Board of Directors and
extrapolates the cash flows for a further year based on an
estimated growth rate which is either based on management's best
estimate or the expected growth rate of the market in which the CGU
operates.
The Group has conducted sensitivity analyses on the value in
use/recoverable amount of each of the CGUs. Based on the result of
the value in use calculations undertaken, the Directors conclude
that the recoverable amount of each CGU exceeds its carrying
value.
The Directors believe there are no cash-generating units where
reasonably possible changes to the underlying assumptions exist
that would give rise to impairment.
The allocation of goodwill to each CGU is as follows: 2022 2021
GBPm GBPm
IP Services 35.8 31.3
Regulated Industries (1) 150.4 133.6
Language Services (2) 239.9 208.1
Language and Content Technology 266.5 242.8
------ ------
At 30 September 692.6 615.8
------ ------
1 Previously Life Sciences and SDL - Regulated Industries
2 Previously Moravia and SDL - Language Services
10. INTANGIBLE ASSETS
Accounting Policy
Intangible assets are carried at cost less accumulated
amortisation and impairment losses. Intangible assets acquired from
a business combination are initially recognised at fair value. An
intangible asset acquired as part of a business combination is
recognised outside goodwill if the asset is separable or arises
from contractual or other legal rights.
Where computer software is not an integral part of a related
item of computer hardware, the software is classified as an
intangible asset. The capitalised costs of software for internal
use include external direct costs of materials and services
consumed in developing or obtaining the software, and directly
attributable payroll and payroll-related costs arising from the
assignment of employees to implementation projects. Capitalisation
of these costs ceases when the software is substantially complete
and ready for its intended internal use.
Other intangible assets are amortised using the straight-line
method over their estimated useful lives as follows:
Trade names 5 to 8 years
--------------------- --------------
Clinician database 10 years
--------------------- --------------
Supplier database 13 years
--------------------- --------------
Technology 3 to 7 years
--------------------- --------------
Non-compete clauses 5 years
--------------------- --------------
Trademarks 5 years
--------------------- --------------
Client relationships 7 to 20 years
--------------------- --------------
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific
software. These assets are amortised using the straight-line method
over their estimated useful lives which range from one to five
years, these costs are recognised in administrative expenses within
the consolidated statement of comprehensive income.
Research and development
Research costs are expensed as incurred. Development expenditure
is capitalised when management is satisfied that the expenditure
being incurred meets the recognition criteria from IAS 38.
Specifically, this is at the point which management believe they
can demonstrate:
-- The technical feasibility of completing the asset,
-- The intention to complete the asset for use or sale,
-- The ability to use or sell the asset,
-- The future benefits expected to be realised from the sale or use of the asset,
-- The availability of sufficient resources to enable completion of the asset,
-- Reliable measurement for the costs incurred during the course of development.
Where these criteria are not met the expenditure is expensed to
the income statement. Following the initial capitalisation of the
development expenditure the cost model is applied, requiring the
asset to be carried at cost less any accumulated amortisation and
impairment losses. Any expenditure capitalised is amortised over
the period of expected future economic benefit from the related
project. For capitalised development costs this period is 3 to 7
years.
The carrying value of development costs is reviewed for
impairment annually when the asset is not yet in use or more
frequently when an indicator of impairment arises during the
reporting period indicating that the carrying value may not be
recoverable.
Development costs that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
Clinician Client
& Non-compete relationships Internally
Trade supplier & & order generated
names databases Technology Trademarks books Software software Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
Cost
At 30 September
2020 9.5 6.6 6.3 2.2 187.7 12.5 9.8 234.6
Additions - - 10.3 - - 1.8 9.4 21.5
Acquisitions - - 107.1 - 139.4 - - 246.5
Disposals (9.1) - - - (3.1) (1.6) (3.7) (17.5)
Currency
translation (0.4) (0.2) (0.3) (0.1) (11.0) - - (12.0)
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
At 30 September
2021 - 6.4 123.4 2.1 313.0 12.7 15.5 473.1
Additions - - 15.5 - 0.2 1.9 6.9 24.5
Acquisitions
(note
13) 0.4 - 2.1 - 6.4 - - 8.9
Adjustments in
respect
of prior periods - - - - 0.4 - - 0.4
Disposals - - - - - (1.9) (2.7) (4.6)
Currency
translation - 1.2 1.2 0.4 47.5 0.8 0.6 51.7
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
At 30 September
2022 0.4 7.6 142.2 2.5 367.5 13.5 20.3 554.0
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
Accumulated amortisation and
impairment
At 30 September
2020 5.6 2.7 4.7 1.6 50.0 8.5 5.1 78.2
Amortisation
charge 3.7 0.6 15.5 0.4 23.0 1.6 3.0 47.8
Disposals (9.1) - - - (3.1) (1.3) (3.7) (17.2)
Currency
translation (0.2) (0.1) (0.2) (0.1) (1.7) - - (2.3)
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
At 30 September
2021 - 3.2 20.0 1.9 68.2 8.8 4.4 106.5
Amortisation
charge - 0.7 18.4 0.2 25.5 1.9 3.4 50.1
Disposals - - - - - (1.9) (2.7) (4.6)
Currency
translation - 0.7 1.1 0.4 13.6 0.5 0.3 16.6
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
At 30 September
2022 - 4.6 39.5 2.5 107.3 9.3 5.4 168.6
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
Net book value
At 30 September
2020 3.9 3.9 1.6 0.6 137.7 4.0 4.7 156.4
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
At 30 September
2021 - 3.2 103.4 0.2 244.8 3.9 11.1 366.6
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
At 30 September
2022 0.4 3.0 102.7 - 260.2 4.2 14.9 385.4
------- ---------- ----------- ------------ -------------- ---------- ----------- -------
Amortisation of acquired intangibles was GBP34.4m (2021:
GBP34.4m) and amortisation of other intangibles was GBP15.7m (2021:
GBP13.4m). The GBP15.7m amortisation of other intangibles comprises
GBP1.9m on amortisation of software (2021: GBP1.6m), GBP3.4m on
internally developed intangibles (2021: GBP3.0m).and GBP10.4m
(2021: GBP9.0m) of technology which related to the SDL business.
The residual GBP34.4m of amortisation was wholly incurred on
acquired intangible assets (2021: GBP34.4m). The Group has
identified intangible assets which are individually material as
follows:
-- SDL technology products acquired of GBP61.9m (2021: GBP74.2m)
with a remaining useful life of 5 years
-- SDL's Helix platform of GBP15.8m (2021: GBP18.9m) with a remaining useful life of 5 years
-- SDL's customer relationships of GBP122.9m (2021:GBP124.4m)
with a remaining useful life of 9 years
-- Moravia's customer relationships of GBP99.9m (2021: GBP81.1m)
with a remaining useful life of 15 years and
-- Life Science's customer relationships of GBP11.6m (2021:
GBP11.8m) with a remaining useful life of 5 years.
No other classes of intangible asset hold individually material
items. The remaining average useful life is 11 years.
11. LOANS
Accounting policy
Loans are recognised initially at fair value, less directly
attributable transaction costs. Subsequent to initial recognition,
loans are stated at amortised cost using the effective interest
method. Loans are classified as current, unless the Group has the
discretion to roll over an obligation for a period of at least 12
months under an existing loan facility.
Directly attributable transaction costs are capitalised into the
loans to which they relate and are amortised using the effective
interest rate method.
When an existing loan facility is replaced by another from the
same lender on substantially different terms, or the terms of an
existing loan are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the profit or loss
in the statement of comprehensive income.
2022 2021
GBPm GBPm
Due in more than one year
Loan 32.2 49.2
Issue costs (2.9) (2.0)
--------------------------- ------ ------
At 30 September 29.3 47.2
--------------------------- ------ ------
Analysis of net debt - 30
September 2022 At 1 Non-cash
October Acquired Cash flows charges At 30 September
GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ----------- ----------- ----------------
Cash and cash equivalents 92.5 0.6 0.1 8.0 101.2
Issue costs 2.0 - 1.5 (0.6) 2.9
Loans (current and non-current) (49.2) - 25.5 (8.5) (32.2)
--------------------------------- --------- --------- ----------- ----------- ----------------
Net debt - excluding lease
liabilities - ("Net debt") 45.3 0.6 27.1 (1.1) 71.9
--------------------------------- --------- --------- ----------- ----------- ----------------
Lease liabilities (51.5) (0.2) 13.1 (8.1) (46.7)
--------------------------------- --------- --------- ----------- ----------- ----------------
Net debt - including lease
liabilities (6.2) 0.4 40.2 (9.2) 25.2
--------------------------------- --------- --------- ----------- ----------- ----------------
Analysis of net debt - 30
September 2021 At 1 Non-cash
October Acquired Cash flows charges At 30 September
GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ----------- ----------- ----------------
Cash and cash equivalents 51.4 55.8 (13.1) (1.6) 92.5
Issue costs 2.6 - - (0.6) 2.0
Loans (current and non-current) (69.1) - 17.7 2.2 (49.2)
--------------------------------- --------- --------- ----------- ----------- ----------------
Net debt - excluding lease
liabilities - ("Net debt") (15.1) 55.8 4.6 - 45.3
--------------------------------- --------- --------- ----------- ----------- ----------------
Lease liabilities (22.8) (37.7) 12.6 (3.6) (51.5)
--------------------------------- --------- --------- ----------- ----------- ----------------
Net debt - including lease
liabilities (37.9) 18.1 17.2 (3.6) (6.2)
--------------------------------- --------- --------- ----------- ----------- ----------------
Non-cash charges against the loan balance represent the effects
of foreign exchange on the financial liability.
On 3 August 2022, the Group entered into an Amendment and
Restatement Agreement ("ARA") with its banking syndicate which
amended its existing US$120m RCF maturing on 10 February 2024, to a
US$220m RCF Facility maturing on 3 August 2026 with an option to
extend maturity to 3 August 2027.
Under the terms of the ARA, the Group's interest margin over the
Secured Overnight Financing Rate ("SOFR") reference interest rate
ranges from 95bps to 195bps and is dependent on the Group's net
leverage. Commitment fees are payable on all committed, undrawn
funds at 35% of the applicable interest margin. The ARA also
contains a US$100 million uncommitted accordion facility.
The debt refinancing was accounted for as a debt modification
without extinguishment resulting in a nominal debt modification
gain being recognised in the parent company's statement of
comprehensive income of GBP5k.
All transaction costs incurred in amending and re-stating the
RCF have been capitalised and are being amortised over the 4-year
term of the facility on a straight-line basis. Currently all Group
borrowings under the RCF are denominated in USD.
12. CASH AND CASH EQUIVALENTS
2022 2021
GBPm GBPm
Cash at bank and in hand 94.8 89.6
Short-term deposits 6.4 2.9
-------------------------- ------ ------
101.2 92.5
-------------------------- ------ ------
The fair value of cash and cash equivalents is GBP101.2m (2021:
GBP92.5m). Restricted cash at 30 September 2022 was GBPNil (2021:
GBPNil).
Short-term deposits have an original maturity of three months or
less depending on the immediate cash requirements of the Group, and
earn interest at the respective short-term deposit rates.
Management consider short term deposits to be 'subject to an
insignificant risk of changes in value.
13. ACQUISITIONS
Liones Holding BV ("Fonto")
On 22 March 2022, the Group acquired the entire issued share
capital of Liones Holding BV ('Fonto') and its subsidiaries for an
initial consideration of Euro 17.7m (GBP14.7m) on a cash and debt
free basis, with additional contingent consideration of Euro 5m
payable in two equal installments on the first and second
anniversary of the transaction. Fonto is a structured content
management business which complements our Tridion proposition and
further builds our Content Technology portfolio.
The fair value of identifiable assets and
liabilities acquired, purchase consideration
and goodwill were as follows: Fair values
GBPm
Net assets acquired:
Intangible assets 8.9
Property, plant and equipment 0.1
Right-of-use assets 0.2
Trade and other receivables 0.9
Cash and cash equivalents 0.6
Trade and other payables (1.1)
Corporation tax (0.3)
Deferred tax (2.2)
Lease liabilities (0.2)
----------------------------------------------- --------------
Total identifiable net assets 6.9
Goodwill 7.8
----------------------------------------------- --------------
Total consideration 14.7
----------------------------------------------- --------------
Satisfied by:
Cash 14.7
----------------------------------------------- --------------
The provisional fair values of assets and liabilities were
recognised effective 22 March 2022 with the purchase price
allocation work concluded in August 2022. This resulted in an
allocation of GBP6.4m to customer relationships, GBP2.1m to
Technology assets and GBP0.4m to Brands, with a corresponding
reduction in goodwill. Additional deferred tax liabilities of
GBP2.2m were recognized on the identified intangible assets. The
fair values of Trade and other receivables and other classes of
assets and their gross contractual amount are the same.
Fonto contributed revenue of GBP1.1m to Group revenue and
GBP0.1m to profit after tax for the period between date of
acquisition and the balance sheet date. If the acquisition had been
completed on the first day of the financial year, Fonto would have
contributed additional revenues of GBP3.4m and increased profit
after tax for the year by GBP1.1m.
The goodwill of GBP7.8m on acquisition comprises the value of
expected synergies to be realized across future periods. These
derive primarily from cross sales of RWS products integration of
services work with the RWS professional service teams and up-sell
of Tridion as a content management service. Integration of Fonto
into the RWS Group has progressed during the second half of the
financial year and will continue during FY23.
Horn & Uchida (prior year acquisition)
The Group acquired Horn & Uchida Patent Translation Ltd, a
specialist based on Osaka, Japan for cash consideration of Y349m
(GBP2.2m) on 7 July 2021 for 100% of its ordinary share
capital.
The fair value of identifiable assets and
liabilities acquired, purchase consideration
and goodwill were as follows: Fair values
GBPm
Net assets acquired:
Customer relationships 0.7
Investment securities 0.2
Trade and other receivables 1.0
Cash and cash equivalents 0.8
Trade and other payables (1.0)
Deferred tax assets 0.1
----------------------------------------------- --------------
Total identifiable net assets 1.8
Goodwill 0.5
----------------------------------------------- --------------
Total consideration 2.3
----------------------------------------------- --------------
Satisfied by:
Cash 2.3
----------------------------------------------- --------------
The provisional fair values of assets and liabilities were
recognised effective 7 July 2021 with the purchase price allocation
work concluded in January 2022. This resulted in an allocation of
GBP0.7m to customer relationships and a corresponding reduction in
goodwill. Additional deferred tax liabilities on the identified
intangibles were recognised of GBP0.2m, with a corresponding
increase in intangible assets. No provisional fair value changes
were made to any other class of asset.
14. POST BALANCE SHEET EVENTS
There have been no significant events that have occurred between
the balance sheet date and the date of authorising these financial
statements which require disclosure or adjustment within these
financial statements.
ALTERNATIVE PERFORMANCE MEASURES
RWS uses adjusted results as a key performance indicator, as the
Directors believe that these provide a more consistent measure of
the Group's operating performance. Adjusted profit is therefore
stated before amortisation of acquired intangibles, acquisition
costs, share-based payment expense and exceptional items. The table
below reconciles the statutory profit before tax to the adjusted
profit before tax.
Reconciliation of statutory profit before tax to 2022 2021
adjusted profit before tax: GBPm GBPm
Statutory profit before tax 83.2 55.0
-------------------------------------------------- ------ ------
Amortisation of acquired intangibles 34.4 34.4
Acquisition costs 2.1 11.2
Share-based payment expense 3.2 1.4
Exceptional items (note 5) 12.5 14.1
Exceptional finance costs 0.3 0.3
-------------------------------------------------- ------ ------
Adjusted profit before tax 135.7 116.4
-------------------------------------------------- ------ ------
Reconciliation of adjusted operating profit to 2022 2021
statutory operating profit: GBPm GBPm
Adjusted operating profit 138.5 118.5
------------------------------------------------ ------- -------
Amortisation of acquired intangibles (34.4) (34.4)
Acquisition costs (2.1) (11.2)
Share-based payment expense (3.2) (1.4)
Exceptional items (note 5) (12.5) (14.1)
------------------------------------------------ ------- -------
Statutory operating profit 86.3 57.4
------------------------------------------------ ------- -------
Organic Revenue
Organic revenue is calculated by adjusting the prior year
revenues by adding pre-acquisition revenues for the corresponding
period of ownership.
2021 2022
2020 Organic 2021 Organic 2022 Organic Organic
Organic Revenue Organic Revenue Revenue Revenue
Revenue Growth/(Loss) Revenue Growth/(Loss) 2 Growth
IP Services 112.8 0.8 113.6 (6.4) 107.2 (6%)
Regulated Industries 157.2 14.0 171.2 1.8 173.0 1%
Language Services 320.9 2.7 323.6 18.5 342.1 8%
Language & Content
Technology 113.7 2.8 116.5 9.1 125.6 8%
---------------------- --------- --------------- --------- --------------- ------------- ---------
Total 704.6 20.3 724.9 23.0 747.9 3%
---------------------- --------- --------------- --------- --------------- ------------- ---------
Organic revenue at constant exchange rates
Organic revenue at constant exchange rates is calculated by
adjusting the prior year revenues by adding pre-acquisition
revenues for the corresponding period of ownership and applying the
2022 foreign exchange rates to both years.
2021
2021 Pre Acq 2021 Organic Organic
Revenue Revenue revenue Constant
at at FY at constant 2022 2022 Organic Currency
FY 22 22 Rates exchange Revenue Revenue Revenue
Rates 1 rates Growth 2 Growth
IP Services 117.5 1.4 118.9 (11.7) 107.2 (10%)
Regulated Industries 168.6 8.1 176.7 (3.7) 173.0 (2%)
Language Services 324.4 13.9 338.3 3.8 342.1 1%
Language & Content
Technology 110.9 8.4 119.3 6.3 125.6 5%
---------------------- --------- ---------- ------------- --------- ------------- ----------
Total 721.4 31.8 753.2 (5.3) 747.9 (1%)
---------------------- --------- ---------- ------------- --------- ------------- ----------
1 Includes SDL and Horn & Uchida's pre-acquisition operating
results
(2) Excludes the FY22 operating revenue of Liones Holding
B.V.
Adjusted Operating Profit
Adjusted operating profit is calculated by adjusting operating
profit for the impact of exceptional items, amortisation of
acquired intangibles, acquisition costs and share based payments.
This is further analysed in note 4 and labelled as 'Operating
profit/(loss) before charging.
Cash flow conversion calculations 2018 2019 2020 2021 2022
GBPm GBPm GBPm GBPm GBPm
Adjusted operating profit 66.3 78.4 72.9 118.5 138.5
Depreciation (excluding right
of use asset depreciation) 2.8 3.0 3.0 6.2 7.1
Amortisation from non-acquired
intangibles 2.0 3.0 3.4 13.4 15.7
Net changes in working capital (7.1) (1.8) 7.1 (23.5) (8.7)
------------------------------------ ------ ------- ------- ------- -------
Underlying cash flow from adjusted
operating activities 64.0 82.6 86.4 114.6 152.6
------------------------------------ ------ ------- ------- ------- -------
Cash conversion 96.5% 105.4% 118.5% 96.7% 110.2%
------------------------------------ ------ ------- ------- ------- -------
Glossary
Adjusted earnings per share or Adjusted EPS - is stated before
amortisation of acquired intangibles, acquisition costs,
share-based payment expense and exceptional items, net of
associated tax effects.
Adjusted net income - Adjusted net income is calculated as
statutory profit for the year adjusted for the Group's amortisation
on acquired intangibles, acquisition costs, share based payment
expense and exceptional items.
Adjusted operating cash flow - is operating cash flow excluding
the impact of acquisition costs and exceptional items.
Adjusted operating profit (reconciled above) - is operating
profit before charging amortisation of acquired intangibles,
acquisition costs, share-based payment expense and exceptional
items. The Group uses share-based payments as part of remuneration
to align the interests of senior management and employees with
shareholders. These are non-cash charges and the charge is based on
the Group's share price which can change. These costs are therefore
added back to assist with the understanding of the underlying
trading performance.
Adjusted profit before tax or Adjusted PBT (reconciled above ) -
is stated before amortisation of acquired intangibles, acquisition
costs, share-based payment expense and exceptional items.
Amortisation of acquired intangibles - is the value of
amortisation recognised on intangibles that were acquired as part
of business combinations, net of the amortisation on those
intangibles charged by the underlying business. This amount is
added back in arriving at adjusted profit and adjusted EPS
measures. This is reconciled to total amortisation as part of note
10.
C ash conversion - is the adjusted operating cash flow expressed
as a percentage of adjusted operating profit.
Constant currency - constant currency measures apply consistent
rates for foreign exchange to remove the impact of currency
movements in financial performance.
EBITDA - is defined as the Group's profit before interest, tax,
depreciation and amortisation.
Net debt - net debt is the net value of cash or debt held by the
business, calculated by taking the Group's cash balance less any
amounts under loans, borrowings and lease liabilities. The Group
presents net debt both including and excluding the impact of lease
liabilities as part of note 16 of the ARA.
Organic - organic measures exclude the impact of acquisitions
without assuming constant currency and are prepared on a common
basis with the prior year.
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END
FR EAAASFANAFEA
(END) Dow Jones Newswires
December 15, 2022 02:00 ET (07:00 GMT)
Grafico Azioni Rws (AQSE:RWS.GB)
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Da Dic 2024 a Gen 2025
Grafico Azioni Rws (AQSE:RWS.GB)
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